1099C from foreclosure

[Trnr395]

I have a client that rec'd a 1099C for a house that was foreclosed on. He has since been living somewhere else as his primary residence for the the last 4 years or so. The amount of debt cancelled was $82,000 and the FMV of the house was $65,000. Do I put the difference on "other income" or do I have to show this through schedule D as a sale? Or am I completely of base....

[kcjenkins]

MORE INFO NEEDED. Was this his primary residence at the time of the foreclosure? If so, it could be treated as a sale of residence, and no need to have any of it taxable. Was it a recourse loan?

[Mr. Pencil]

Do I put the difference on "other income" or do I have to show this through schedule D as a sale?

Maybe both. There are a number of variables to look at. The IRS has a good book available, Pub 4681. It isn't real easy reading because there are lots of words that look ordinary but have specialized meaning, so pay attention to definitions and explanations. Also search this forum for "1099C" and you'll find examples of the rules applied in various scenarios.

[MsTabbyKats]

You need to check Form 982....and see if the client qualifies for an exclusion.

If not,,,the Box 2 amount is taxable on Line 21.

[Trnr395]

Thanks guys, It wasn't his primary residence at the time of foreclosure. I will have to get some more info from him. He is a neighbor of my parents and he talked to them about it. Not my client and will need to talk to him for more specifics. Thanks again.

[Lee B]

I agree Pub 4681, has a number of good examples which I find are fairly well written.