jainen

>>wait for the 1099C<< We know from the 1099-A (as reported in original post) that it was a non-recourse loan. Therefore the use of the property is not relevant to whether there was COD income. Non-recourse means the debt was settled in FULL by surrendering the property. Of course, it might not really have been a non-recourse loan. Sometimes banks get that box wrong. And sometimes a bank will send a 1099-C anyway, apparently just to make trouble for the deadbeat borrower (or maybe because stupid, I mean, untrained people work there). Luckily our clients have us smart folks to straighten it all out.

>>Until he gets a 1099-C<< He won't get a 1099-C because it was a non-recourse loan. He isn't liable for anything more than the entire property, so there is no cancellation of debt. Amend the return to report the sale of business property for $280,000 in the ordinary way.

>> Negative Loan Origination Fee on Feb. 3<< That's it, thanks! I don't think it's a basis adjustment in a refinance. If the SELLER pays points (or other closing costs) that could be an adjustment to sales price. But, as Medlin explained, negative points is just a way to describe a higher interest rate. In other words, the new loan amount wasn't enough to payoff the old loan and closing costs. So the bank bumped the interest rate, which allows them to sell the paper for that much more.

Have you noticed they are now showing hidden points on settlement statements for refinance? I'm looking at $501 "origination charge" debited in addition to loan payoff, title insurance and other closing costs. Then there is $618 "points" credited in addition to the loan amount. Do I amortize the net (which is less than zero)?

>>how do you "forget" to file for unemployment?<< That's why it's called "dope."

>> 1% APR << The Applicable Federal Rates are published monthly at My link.

>> it is a felony<< Well, I admit that felonies are sometimes committed in our offices. But post-dating a check is simply promising to pay in the future. And must I point out that Terry WAS paid exactly when promised? Come on, folks, it's still only February. We shouldn't start ragging on our clients for at least another month.

>> It was her legal obligation to have the funds available.<< That is not accurate. A post-dated check is nothing more than an I.O.U. Terry has no reason to be upset because she already knew there were no funds when she accepted it. A better way to handle it would have been to insist on a current date and promise to hold the check until funds are available.

>>I should reimburse her<< Oh, give her the money. Or at least a credit for next year. Legally, you agreed to accept a promissary note, and then you used it in an awkward way that even you admit was stupid. What's 35 bucks anyway?

>> an individual would be able to take the FMV << For an individual or a corporation the deduction for ordinary income property is limited to the lower of FMV or adjusted basis. Typically, the code says it kind of backwards--The deduction is FMV reduced by the amount that would be treated as ordinary income if the vehicles were sold. Even with capital gains, if tangible personal property like a vehicle, the deduction is FMV reduced by the gain. Generally, only with qualified appreciated stock can you deduct FMV exceeding basis.

>> Is the house still theirs?<< Maybe they are buying it back, or renting, or the court reversed the transfer, or the bank was bluffing. All sorts of things are possible when bank lawyers get on to something. Call the County Assessor and ask who owns that parcel number.

>>1099-C comes after the individual is no longer insolvent... The banks just don't care<< Please explain why the bank should favor a borrower who can afford to honor his commitment but chooses not to.

>>the last paragraph especially<< You should absolutely do it, kc. Just think--3,000,000 new RAL clients! I thought the second paragraph was pretty interesting too. The bank went down still whining that they shouldn't have to follow the regulations. [Or rather, the bank's client JH went down.]

>>Can heir use this $5000 as a charitable deduction?<< I don't think so. First of course the heir did not donate anything, just didn't inherit as much as hoped. And there isn't any charitable deduction anyway, because the donation was made out of the estate's principal, not income. The capital loss can be deducted by the estate in the ordinary way, or passed to the heir when the estate is closed. (In calculating gain or loss, remember the basis is stepped down to FMV at date of death.)

>>Thank you for your help JRS<< You're welcome.

>>insurance from his previous full-time job<< This policy is an employer group plan, not established under his own business so therefore not eligible for an above-the-line deduction. Instead, I would look VERY closely at treating the 1099-MISC income as wages by filing Forms 8919 and SS-8.

>>he IS on the title<< She didn't get a mortgage without his qualifying income, and the lien is not enforceable without his signature anyway, so obviusly he is a borrower too. See the instructions to lines 10 and 11 of Schedule A. "If you and at least one other person (other than your spouse if filing jointly)were liable for and paid interest on the mortgage, and the other person received the Form 1098, attach a statement to your return showing the name and address of that person. To the right of line 11, enter 'See attached.'"

>>there would be some added forms<< I hear ya, bro. With all this e-file nonsense, we don't have enough paperwork anymore.

>>asset bought sold same year<< According to Pub 946, "To be depreciable, property must have a useful life that extends substantially beyond the year you place it in service." Quickfinder says baldly, "No depreciatiation deduction is allowed for property placed in service and disposed of in the same year." (Quickfinder says property converted to personal use is treated as a disposition for calculating MACRS, though recapture doesn't apply until it is actually sold or junked.) There are special rules for ACRS property, like kind exchanges, and involuntary conversions.

>>how do you determine business usage without the log? << The same way I always did before. It's written right there on my ceiling, so all the client has to do is lean back in the chair and read it--"I only use this [phone/car/computer/Mastercard/...] for business 100%!"

>>It is called salary for the state reports << Sounds like wages to me. "Take the office"? The IRS virtually NEVER allows clerical workers to be treated as independent contractors. This is still a HUGE risk, so save your clients a whole lot of grief--have them comply with minimum wage, workers comp, and payroll tax laws.

>>what is fmv when it didn't sell << Sale price is only one of several methodologies for real estate appraisal. Business property is often valued by its income stream. Call the leasing agent and ask what gross rent multiplier or cap rate was used in arriving at the payment amount.

>>principal residence<< For cancellation of debt, the term has the same meaning as in Section 121, two out of five years. However, in many states purchase loans are non-recourse. If this is a non-recourse loan, he can't use "cancellation of debt for principal residence" because technically he doesn't have any COD, just a loss on sale. In a broader context, since he can afford to honor his commitments why does he want to stick it to the bank that helped him out? No wonder our economy is a mess!

>>I am sticking by NOT alimony<< Me too. He did the decent thing in not making her wait for the QDRO, but he can't expect the government to reimburse him. That extra money was NOT paid as alimony according to the decree.

>>1245 property<< I think it is a Section 197 intangible, which is treated as Section 1245 if placed in service and used for more than a year.