Late 1099 on foreclosure of principal residence

[BulldogTom]

TP had his principal residence foreclosed in 2013.  As part of the deal, the lender paid him 9K to move out.  He did not mention this to us when he did his taxes. Taxpayer claims he never got the 1099 from the bank.

 

Yesterday, he sends us a notice from the IRS that they have a 1099MISC and they want their tax on it.  Of course, it includes SE tax.  The date on the letter is Feb 9th.  The due date to respond is March 11th.

 

DEAR CLIENT, DID YOU MISS THE PART OF THE ENGAGEMENT LETTER THAT SAYS TO IMMEDIATELY NOTIFY ME IF YOU RECEIVE ANY CORRESPONDENCE FROM THE IRS OR STATE TAXING AUTHORITIES!!!!!!!!  Sorry, that is a different thread.

 

Anyway, I believe that if this 1099 had been part of the original return, the amount would have been added to the sales price and the amount would have been excluded as part of the loss or if a gain, under §121.  I think there was a rev proc or some guidance from the IRS on these move out payments.

 

Anyone have a quick link to this item.   I am going to look tonight, but if someone has it at their fingertips, I would be most grateful.

 

Thanks in advance.

 

Tom

Newark, CA

[ILLMAS]

That is a line 21 item and not subject SE tax.

[Elrod]

Tom,

 

Try......http://www.irs.gov/irb/2014-2_IRB/ar09.html

 

Or....http://www.irs.gov/irb/2005-07_IRB/ar10.html