1099-A question

[StevenL]

Hello Everyone,

I have a client with a 1099-A for abandonment of their primary residence and I want to make sure I am entering the information correctly since I have never done one of these before. I entered the amount in box 4 of the 1099-A as miscellaneous income on line 21 of the 1040 then, since they filed for bankruptcy I entered the same amount of line 2 of Form 982 to reduce the taxable portion to zero.

Is this the correct way to report this or is there another way I should go about reporting this?

Thanks for all your help.

Steven LaForest, ATP

Dearborn Heights, MI.

[David1980]

Usually unless you get a 1099-C there's no COD income. And even if there is COD income, it wouldn't be the FMV of the home (box 4). Most likely either box 4 is more than box 2 (in which case there is no COD), or it's non-recourse. If there was COD, it would be just the difference of FMV and balance outstanding (the amount that balance outstanding exceeds FMV) but without a 1099-C I wouldn't assume it.

Another possibility is the debt isn't cancelled. It's entirely possible for a bank to take a home that doesn't satisfy the debt and then still try to collect on the remainder.

[kcjenkins]

But if he went through bankruptcy, there should not be a 1099-c at all. And nothing will need to be reported. But the way you did it should work OK, Steven.

[StevenL]

But if he went through bankruptcy, there should not be a 1099-c at all. And nothing will need to be reported. But the way you did it should work OK, Steven.

Thanks for the confirmation KC. I appreciate your help.

[LindaB]

"I entered the amount in box 4 of the 1099-A as miscellaneous income on line 21 of the 1040 then, since they filed for bankruptcy I entered the same amount of line 2 of Form 982 to reduce the taxable portion to zero."

You don't want to do this. The purpose of the form 982 is to list COD income so you don't have to list it as ordinary income on line 21. And the entry on form 982 would not take away the income shown on line 21. Besides, a 1099-A is not showing any COD income, so neither line 21 nor form 982 would be relevant. The 1099-A is showing a disposition of the property, which is entered on the tax return as a sale of the property.

[terry]

"I entered the amount in box 4 of the 1099-A as miscellaneous income on line 21 of the 1040 then, since they filed for bankruptcy I entered the same amount of line 2 of Form 982 to reduce the taxable portion to zero."

You don't want to do this. The purpose of the form 982 is to list COD income so you don't have to list it as ordinary income on line 21. And the entry on form 982 would not take away the income shown on line 21. Besides, a 1099-A is not showing any COD income, so neither line 21 nor form 982 would be relevant. The 1099-A is showing a disposition of the property, which is entered on the tax return as a sale of the property.

I agree, I have entered these on Sch D with Sec 121 exclusion.

[Tax Prep by Deb]

"I entered the amount in box 4 of the 1099-A as miscellaneous income on line 21 of the 1040 then, since they filed for bankruptcy I entered the same amount of line 2 of Form 982 to reduce the taxable portion to zero."

You don't want to do this. The purpose of the form 982 is to list COD income so you don't have to list it as ordinary income on line 21. And the entry on form 982 would not take away the income shown on line 21. Besides, a 1099-A is not showing any COD income, so neither line 21 nor form 982 would be relevant. The 1099-A is showing a disposition of the property, which is entered on the tax return as a sale of the property.

Thanks again LindaB.

You seem to have a good grasp on this subject. I have spent literally hours researching and following the steps to handle these and earlier you confirmed that my handling was correct. Not that I rely soley on others opinions, but it is nice to have someone who agrees with you. At least then you don't feel alone in thinking the way your do!

Deb!

[kcjenkins]

You are correct, and I read his post too fast. I just took from it that he put it in and then took it back out, which would work. But I agree with Linda and Deb that you really don't need to put it in at all from a 1099-A.

[StevenL]

After reading all your posts I have decided to remove the 1099-A and not report it at all. Thanks for all your help

Steven LaForest, ATP

Dearborn Heights, MI.