1099A

[Eli]

Client received a 1099A in reference to a freightliner truck he used in a sch c trucking business a couple of years ago.

Box 1 Date of abandonement: 3-6-09

Box 2 shows an amount of $8389

Box 4 shows an amount of $8950

Never had one of these before & am at a loss as to how to report it.

I tried pub 17, but all I saw was cancelled debt. Any leads would be greatly appreciated.

Thanks!!

Eli

[BulldogTom]

Eli,

He has "sold" the truck back to the bank. Use the amount of debt forgiven as the sales price and do a disposition just like you would any other asset that has been sold.

Tom

Lodi, CA

[Eli]

Eli,

He has "sold" the truck back to the bank. Use the amount of debt forgiven as the sales price and do a disposition just like you would any other asset that has been sold.

Tom

Lodi, CA

He no longer has the sch c bus. He went with a different preparer last year (2008) & they did away with it then.

Would I have to go back to that years tax return?

Thanks for the help, Tom!

Eli

[BulldogTom]

If the prior preparer handled it as a sale of an asset on the 2008 return because that is the date that the client gave it back to the bank, I would do nothing. I would document the file and be ready to respond to an IRS inquiry if it comes.

But I would be suspicious of the treatment by the other preparer. Double check that the truck was properly disposed of for the amount of debt remaining on the note at the time. If it was not done correctly, advise your client accordingly.

Tom

Lodi, CA

[jainen]

>>Use the amount of debt forgiven as the sales price<<

Apparently the repossession covered the balance due in full, so even though an auto loan is recourse there was no 1099-C for cancellation of debt. In my opinion the amount realized on disposition is $8389, the lower of debt or FMV. As I read Eli's two posts, the truck was converted to 100% personal use in 2007 or 2008 (possibly requiring Section 179 recapture), and abandoned in 2009. Eli will have to look at the prior year returns to determine adjusted basis (perhaps calculating the depreciation factor in the standard mileage allowance taken). The taxpayer will have a taxable gain or non-deductible loss in 2009 (possibly with recapture of Section 1245 or bonus depreciation).