Need to get rental house lost in bankruptcy off return

[jasdlm]

Client dropped off tax information; included nothing on rental house (has owned since I've been doing return) so I called. Client said the house was 'lost in bankruptcy . . . maybe sometime in May'. No more information (except that no rent was received for the year). I called the bankruptcy attorney, who said 'just show it at 0, because they were upside down in it anyway'. Great. That's helpful. I started to explain about basis not equaling debt, etc., and gave up. Questions:

1) I have no idea what 'value' to use for the disposition. I did some reading which indicated that the total value of the 'sale' would be the auction price less legal fees. To my knowledge (and from what I can find out from the TP and attorney), there has been no 'auction'. According to the County's website, the house is still owned by Wells Fargo. Any ideas on how I can close this out? TP is going to be shocked to find out she owes tax.

2) My guess is it will take a few years for the 1099C to roll around. I guess I should just warn TP about it and deal with it when it comes?

Thanks for all advice.

[jainen]

>>Any ideas on how I can close this out?<<

Read the bankruptcy papers.

[Randall]

And perhaps determine client's insolvency position at time of bankruptcy in case 1099-C shows up in future.

[jasdlm]

Thanks so much, gentlemen. I just received the bankruptcy filing faxed from the Courthouse. I feel like an idiot for not thinking of it.

Thanks again for your great help.