Form 1099-A

[MAMalody]

I hate to say this, however, I have two clients that have 1099-As that I need to handle. I am embarrassed to admit that I have never had to handle a live one and other than CPE a couple of years ago only have a "basic" understanding of the proper handling on the tax return. They have not received any 1099-Cs. I am leaning toward putting them on extension to sort this out...the problem could be if there are large amounts being added to income. Of course, they both say that won't be the case. Question: Does not having received a Form 1099-C mean I should not handle it on this years return, but wait for next year when, hopefully, the C will be received? I have the IRS pub, however, is there a source out there that has some good material in this area, either printed material or a web site? Other ideas? Thank you for your consideration of this.

[Pacun]

I hate to say this, however, I have two clients that have 1099-As that I need to handle. I am embarrassed to admit that I have never had to handle a live one and other than CPE a couple of years ago only have a "basic" understanding of the proper handling on the tax return. They have not received any 1099-Cs. I am leaning toward putting them on extension to sort this out...the problem could be if there are large amounts being added to income. Of course, they both say that won't be the case. Question: Does not having received a Form 1099-C mean I should not handle it on this years return, but wait for next year when, hopefully, the C will be received? I have the IRS pub, however, is there a source out there that has some good material in this area, either printed material or a web site? Other ideas? Thank you for your consideration of this.

You have to report the disposition of the asset on Schedule D.

[Maribeth]

I hate to say this, however, I have two clients that have 1099-As that I need to handle. I am embarrassed to admit that I have never had to handle a live one and other than CPE a couple of years ago only have a "basic" understanding of the proper handling on the tax return. They have not received any 1099-Cs. I am leaning toward putting them on extension to sort this out...the problem could be if there are large amounts being added to income. Of course, they both say that won't be the case. Question: Does not having received a Form 1099-C mean I should not handle it on this years return, but wait for next year when, hopefully, the C will be received? I have the IRS pub, however, is there a source out there that has some good material in this area, either printed material or a web site? Other ideas? Thank you for your consideration of this.

Mike, you have two things going on, apples & oranges. The 1099-A reports the "sale" of the asset; the 1099-C reports the cancellation of debt, if any.

You will report a transaction this year for the 1099-A. It may or may not be taxable, for example, if the property was a personal residence.

The selling price is the lower of the loan balance or the FMV of the property given up. For example, if the loan balance was 200,000 and the FMW was 150,000, you would use 150,000 as your selling price, subtract your basis, and the result would be taxable under whatever rules the asset would be taxable under in a "normal" sale.

If the loan is nonrecourse, there will be no cancellation of debt. In our state, only original acquisition of a personal residence can be nonrecourse. Almost everything else if recourse.

If you have a recourse debt and the lender writes it off, then you will receive the 1099-C. This reports the amount of the debt that was not satisfied by the taking of the property. So, as in the above example, if the lender takes back property with a FMW of 150000 and the loan balance is 200000, then the lender will write off 50,000 and report that on a 1099-C. This income usually will be ordinary income.

We have spoken before about the classes I take down in Kennewick from Joy Wilen. She will be in Kennewick on May 16 and will be doing a 6 hour class on foreclosures, bankruptcy, etc. Her fee is $115 and the class is held at the Red Lion at Columbia Center. Her phone number is 1-360-695-9818. I will be there and if you show up it would be great to finally meet you.

Maribeth

[Pacun]

If you have a recourse debt and the lender writes it off, then you will receive the 1099-C. This reports the amount of the debt that was not satisfied by the taking of the property. So, as in the above example, if the lender takes back property with a FMW of 150000 and the loan balance is 200000, then the lender will write off 50,000 and report that on a 1099-C. This income usually will be ordinary income.

A lot of times the bank waits until it sells the property to issue the 1099-C. In the case above, what's written on the 1099-A is not an accurate reflection of the what the amount of debt will be forgiven. If the property is sold for $75K, the 1099-C will show $125 as debt forgiven.

[grandmabee]

Mike, you have two things going on, apples & oranges. The 1099-A reports the "sale" of the asset; the 1099-C reports the cancellation of debt, if any.

You will report a transaction this year for the 1099-A. It may or may not be taxable, for example, if the property was a personal residence.

The selling price is the lower of the loan balance or the FMV of the property given up. For example, if the loan balance was 200,000 and the FMW was 150,000, you would use 150,000 as your selling price, subtract your basis, and the result would be taxable under whatever rules the asset would be taxable under in a "normal" sale.

If the loan is nonrecourse, there will be no cancellation of debt. In our state, only original acquisition of a personal residence can be nonrecourse. Almost everything else if recourse.

If you have a recourse debt and the lender writes it off, then you will receive the 1099-C. This reports the amount of the debt that was not satisfied by the taking of the property. So, as in the above example, if the lender takes back property with a FMW of 150000 and the loan balance is 200000, then the lender will write off 50,000 and report that on a 1099-C. This income usually will be ordinary income.

We have spoken before about the classes I take down in Kennewick from Joy Wilen. She will be in Kennewick on May 16 and will be doing a 6 hour class on foreclosures, bankruptcy, etc. Her fee is $115 and the class is held at the Red Lion at Columbia Center. Her phone number is 1-360-695-9818. I will be there and if you show up it would be great to finally meet you.

Maribeth

I love Joy Wilen. I do her update class every year and try to get in one other too. She somethings speaks at our anual convention.. very very good speaker and knows her stuff. She always work with real live situations we work with.