Form 1099A

[Terry D EA]

Client received form 1099A for rental property that was foreclosed on. No tenants, no rent can't make payments and you know the rest of the story. There is a loss on this transaction. Shouldn't form 4797 be used to report this disposition instead of Sch D? Also, I am a bit confused by the calculations the software is performing.

 

FMV from 1099A  = 48000.00

Adj basis =              71,000.00

Loss =                     23,000.00 (This is correct and should go to form 4797??)

 

Form 1099 A is calculating 11,122.00 which is the difference between the principal balance and the adjusted basis and putting that amount on line 21 as other income. This is the one that I am questioning.Any help to clear the fog out of my brain is appreciated.

 

 

[Abby Normal]

The 11,122 is COD income that can be excluded by bankruptcy or insolvency. Sounds like the software is splitting the total COD between line 21 and 4797, which would make 4797 no gain or loss because proceeds = adj basis.

[Jack from Ohio]

This must be treated as a sale of the rental and reported on 4797. Not on line 21. Use the amount of debt written off as the sale price.  Recapture all appropriate depreciation.  FMV has NO PLACE in this calculation.  There is usually a taxable capital gain. 

 

This is NOT forgiveness of debt, and cannot be changed by bankruptcy.

 

When the client receives a 1099-C, then deal with the debt forgiveness.

 

The 1099-A means that the client sold his property to the bank for the amount remaining on the mortgage.

Edited April 11, 2015 by Jack from Ohio

[Terry D EA]

Jack I agree for the most part. I knew the sale or foreclosure should have gone on form 4797 and yes the debt forgiveness, if any, will come in the form of the 1099-C. My problem is when I enter the input for the 1099-A the program automatically does the calculation and puts the 11,122 on line 21 which I agree shouldn't go there. Where I don't agree is there is sometimes a loss on these transactions and in this case there is a loss.

 

As for Jimdaviscpa - the program has not opened or brought the 4797 in. I am using OneDesk and I can't see where to override these calculations if I need to which seems as though I do. No bankruptcy or insolvency is involved and with that said is the 11,122 indeed COD income?

[Jack from Ohio]

Jack I agree for the most part. I knew the sale or foreclosure should have gone on form 4797 and yes the debt forgiveness, if any, will come in the form of the 1099-C. My problem is when I enter the input for the 1099-A the program automatically does the calculation and puts the 11,122 on line 21 which I agree shouldn't go there. Where I don't agree is there is sometimes a loss on these transactions and in this case there is a loss.

 

As for Jimdaviscpa - the program has not opened or brought the 4797 in. I am using OneDesk and I can't see where to override these calculations if I need to which seems as though I do. No bankruptcy or insolvency is involved and with that said is the 11,122 indeed COD income?

Why enter the 1099-A?  Sell the asset using the figures as I directed.