Rental Home Given Up In Bankruptcy

[David]

Client gave up rental home in bankruptcy at the end of 2008.

I am trying to reflect this in the ATX asset manager disposition tab. The disposition is showing a loss because there is no sell price.

There shouldn't be a loss since the client is being relieved of the mortgage in the bankrutcy, should there?

How should the disposition be done in the asset manager?

On a related issue - the client hasn't received a 1099-C or 1099-A for this. Since the bankruptcy was filed in 2008, shouldn't a 1099 been received? Or do these tend to be issued the following year?

If a 1099 is issued in 2009, would the adjusted basis of the property be taken against the cancellation of debt income in 2009?

Thanks.

[RoyDaleOne]

Th 1099's you refer to are not issued when the client is in bankruptcy.

Tell ATX not to compute gain/loss.

[LindaB]

Th 1099's you refer to are not issued when the client is in bankruptcy.

Tell ATX not to compute gain/loss.

Why would he not show a gain or loss on a rental property?

[LindaB]

Client gave up rental home in bankruptcy at the end of 2008.

I am trying to reflect this in the ATX asset manager disposition tab. The disposition is showing a loss because there is no sell price.

There shouldn't be a loss since the client is being relieved of the mortgage in the bankrutcy, should there?

How should the disposition be done in the asset manager?

On a related issue - the client hasn't received a 1099-C or 1099-A for this. Since the bankruptcy was filed in 2008, shouldn't a 1099 been received? Or do these tend to be issued the following year?

If a 1099 is issued in 2009, would the adjusted basis of the property be taken against the cancellation of debt income in 2009?

Thanks.

The selling price would be the lesser of the amount of debt canceled or the FMV. He was relieved of the mortgage, but was also relieved of the property. It's treated as a sale and there could be gain or loss since it was a rental property. He should at least get a 1099-A to show the transfer of the property.

[David]

The selling price would be the lesser of the amount of debt canceled or the FMV. He was relieved of the mortgage, but was also relieved of the property. It's treated as a sale and there could be gain or loss since it was a rental property. He should at least get a 1099-A to show the transfer of the property.

Thanks Roy and Linda for your help with this. I guess it would make sense that the lesser of debt cancelled or FMV would be considered the selling price.

I have 2 questions related to the disposition section of the asset entry form.

1. Since the cost basis for rental property does not include the land value, how do you reflect the land cost in the cost basis that is used to calculate the gain/loss? The only thing I can figure is to use line 13 "basis adjustment". Is that line for this type of adjustment or is it for some other adjustment?

2. Since there are other assets associated with the rental property such as appliances, I was trying to use the bulk disposition feature. However, I received a message that if E-filing, all assets must have the same acquisition date and "various" can't be used. Of course, appliances and other rental property assets aren't going to be purchased on the same day. So unless I am missing something, it seems as though the bulk disposition feature is worthless. How have you handled this situation?

Thanks for your help.

[RoyDaleOne]

You are not required to report on Form 1099-C the following:

Certain bankruptcies. You are not required to report a debt discharged in bankruptcy unless you know from information included in your books and records that the debt was incurred for business or investment purposes. If you are required to report a business or investment debt discharged in bankruptcy, report it for the later of:

The year in which the amount of discharged debt first can be determined or

The year in which the debt is discharged in bankruptcy.

[RoyDaleOne]

You noticed that the taxpayer was in bankruptcy?

See Section 108.

[LindaB]

You noticed that the taxpayer was in bankruptcy?

See Section 108.

No, I wasn't paying enough attention. If the property was turned over to the bankruptcy estate, then the client wouldn't report anything on his personal return?