1099-C

[ILLMAS]

TP lost his job in 2011/2012 and was not able to make mortgage payments, through a non-profit agency they were able to get the bank to lower their mortgage payment.   Finally after going back and forth to court, the judge asked the bank just to reduce loan amount since the TP has been paying the mortgage payment without a problem, bank agreed and sent the TP a 1099-C for 100K.  My question is, TP was insolvent back then, now in 2014 TP is doing a little better (has a job now), can this amount be report on form 982?

 

Thanks

 

MAS

[Jack from Ohio]

TP lost his job in 2011/2012 and was not able to make mortgage payments, through a non-profit agency they were able to get the bank to lower their mortgage payment.   Finally after going back and forth to court, the judge asked the bank just to reduce loan amount since the TP has been paying the mortgage payment without a problem, bank agreed and sent the TP a 1099-C for 100K.  My question is, TP was insolvent back then, now in 2014 TP is doing a little better (has a job now), can this amount be report on form 982?

 

Thanks

 

MAS

It is my opinion, that since the cancellation was for debt on his primary residence, you can use that reason for not taxing it on form 982.  We had a very similar situation.

[frazzled]

I second Jack's treatment

[mcb39]

I second Jack's treatment

 

I third it.  Just had to file a 982 for that exact reason.

[Lee B]

You will need to look at the closing statement for this loan, especially if it was a refi.

 

They may have taken cash out or paid off credit cards etc which would not be qualified residence debt

 

Thus part of the debt cancellation could still be taxable or have to be excluded for a different reason i.e. insolvency.

 

It's not always as straightforward as it seems.

[BulldogTom]

Second cbslee.  Make sure you know if it was refinanced and what the refinance funds were for.  Other than knowing that information, I agree with the other posters.

 

Tom

Newark, CA

[Jack from Ohio]

If it was a loan modification, there was no money out.  That would negate the need for the modification.  This IS as straightforward as it seems.  If the house is surety for the loan, it fits.

[mcb39]

If it was a loan modification, there was no money out.  That would negate the need for the modification.  This IS as straightforward as it seems.  If the house is surety for the loan, it fits.

 

Mine was a loan modification, clearly spelled out on the first page of the contract.  If she had just brought the 1099c in last year, it would have been so much easier.

[joanmcq]

I have a client that just got a 1099-C for a foreclosure that happened 4 or 5 years ago on her primary residence. Can I still use the exemption on form 982?

[jshtax]

Joan I think you can since it was debt from their primary residence at the time. From my experience the IRS does not even look at 982s for primary residence. I have only had issues when trying to claim insolvency. 

 

While we are on topic of 982 has anyone ever used one for the business real estate exemption?

[Jack from Ohio]

I have a client that just got a 1099-C for a foreclosure that happened 4 or 5 years ago on her primary residence. Can I still use the exemption on form 982?

Yes

[KEYWEST_RICKS]

someone came in this week... i have not seen this before..... original loan was 200,000.       received a 1099 c for 270,000 of debt cancelled and a 1098 for 70,000 of mortgage interest paid???

 

no refi or anything like that ....the $200,000 was to purchase the home.  but penalties and interest have been added over the last four years.

 

 

 

still non tax due to primary residence???????

[mcb39]

I would say Yes, but I would think twice before deducting the $70,000 mtg interest paid.

[Pacun]

someone came in this week... i have not seen this before..... original loan was 200,000.       received a 1099 c for 270,000 of debt cancelled and a 1098 for 70,000 of mortgage interest paid???

 

no refi or anything like that ....the $200,000 was to purchase the home.  but penalties and interest have been added over the last four years.

 

 

 

still non tax due to primary residence???????

 

Report $270K on 982 and do not take any of the $70K on Schedule A or E

[Lee B]

Joan I think you can since it was debt from their primary residence at the time. From my experience the IRS does not even look at 982s for primary residence. I have only had issues when trying to claim insolvency. 

 

While we are on topic of 982 has anyone ever used one for the business real estate exemption?

 

Yes, I had one several years ago. It was a small house that was being rented. It went thru with no questions.

[FreedomTaxed]

http://www.irs.gov/Individuals/The-Mortgage-Forgiveness-Debt-Relief-Act-and-Debt-Cancellation-

 

"The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.

 

This provision applies to debt forgiven in calendar years 2007 through 2014. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition."