1099-C -> From a 1031 Exchange

[ILLMAS]

Facts (not using real numbers)

TP bought investment property thourgh a 1031 Exchange in 2006 for $450K (TP did not live there 100% rental prop)

TP recieves a 1099-C:

Date of canceled XXXX 2010

Amount of debt canceled $335K

Was borrower personally liable for the repayment of the loan? Check off as YES

FMV $170K

From 1031 exchange:

TP paid 435K for the property, $85K was used a down payment from the 1031 exchange, so his mortgage was for $350, he paid for a couple of years until he couldn't, now my question is, is he on the hook for the difference of between the FMV and canceled debt and on top of that on $85K which he deferred? From the 1099-C, box 6 Bankruptcy is NOT check off, and supposely everything was included the brankruptcy, I just want to make sure I inform him before doing any work, and of course he went through bankruptcy because he was not able to. Your thoughts?

[jainen]

>>FMV $170K<<

It looks to me like C.O.D. income is $165K (335-170). You will need to determine if he is eligible to exclude that due to bankruptcy, insolvency, or qualifed real property business. In any case, he also reports the sale on Form 4797 with gain/loss calculated as $170K (lower of balance due or FMV) minus his adjusted basis. Make sure you agree about the correct FMV.

It's not likely, but if use of the property changed he might have to amend 2006 to remove the 1031 exchange and recalculate basis. Somewhat more likely is that I got something wrong in this post, but I'll refund my entire fee if needed.

[ILLMAS]

Thanks, but why would you refund your fees?

[kcjenkins]

That's a joke, MAS, since he did not charge you a fee for answering! Just a little humor, you know. Yeah, it's a 'little' humor, but hey, it's March, so we have to cut some slack, right?

[jainen]

>>Just a little humor<<

Like many on this forum, MAS is a bit wary about my posts. The last time I answered him (Inconsiderate Son), it was not funny at all. So I figured I owed him some light-heartedness with good numbers.

[ILLMAS]

>>Just a little humor<<

Like many on this forum, MAS is a bit wary about my posts. The last time I answered her (Inconsiderate Son), it was not funny at all. So I figured I owed her some light-heartedness with good numbers.

Thanks but I am still a he, the picture you see is of my daughter, now she is the one that takes my money and she is only 2:)

[jainen]

>> I am still a he <<

Forgive me--I'm from California where nobody can ever figure that out anyway, even about themselves. I edited my post, and I'll refund my fee directly to Daddy's Girl.