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indestructo · Mar 13, 2011, 10:27 AM

I have a fairly tricky situation. We foreclosed on a rental house in July last year. We had the house listed for under $30,000 for nearly all of 2010. The house is in one of the hardest hit areas effected by the recession. Box 4 on my 1099-A reports $98,000 for fair market value. I have also noticed that this value is now listed on the assessors information. It appears on the assessors information that the bank assumed ownership of the house through sheriff's deed for that FMV. Even if we put the $30-40,000 into the house to rehab it, we're still only looking at a FMV in the $70,000 range. One last detail, the house still isn't sold.

With my deductions my adjusted basis ends up around $84,000 with the amount in box 2 listed as $94,000. I've listed my gain as the FMV - adj basis. I've seen other information that says Box 2 - adj basis. What is the right way to go?

I also want to contest the FMV on the 1099 but my thought is that there may not be enough time. If I do have to go with FMV - adj basis, can I pull sales of comparable properties from July and use that as evidence that the FMV is much too high?

Thanks a bunch in advance! This has been plaguing my thoughts lately.

JudyKayTee · Mar 13, 2011, 10:59 AM

I think I know what you are asking but I have a question. YOU foreclosed on a rental house. You held the mortgage?

indestructo · Mar 13, 2011, 11:05 AM

Yes

joypulv · Mar 13, 2011, 11:23 AM

Are you possibly within the time limit for appealing the assessment?

indestructo · Mar 13, 2011, 11:32 AM

Sorry that may have been confusing. Its not the assessment that is the problem. It's the fair market value. Could it be that they based the FMV on the assessment? I think I am well past the time limit to appeal the assessment that was released for the 2010 tax year. If I recall correctly, at the time I thought the assessment was fair at that point.

joypulv · Mar 13, 2011, 03:25 PM

I can't answer about 1099 A instructions.
They seem confusing to me.
I do read on the IRS site that anyone who feels that their FMV is wrong should protest to the lender and reply to the IRS follow up questionnaire - (regarding sales that happen after you have paid tax, maybe?)
I also see suggestions from people who say that a high FMV, if not a mistake, is revenge or spite. Why? Don't know, but you are an investor, not a homeowner. Or maybe someone just made it up because they didn't notice that you won't get an exemption.
FMV is supposed to be based on comps, appraisal, and assessment.