short sale 1099c

[bstaxes]

Client is selling home on a short sale. They can't afford to keep paying on the mortgage husband lost job 1 year ago. He has found a new job but they are still struggling. Their attorney says they will get 1099 c. Now I had been reading everything I can find and I am still total confused. If the 1099 c has a number in box 2 (amount of debt canceled) that amount must go on the 1040 as income?

Don't know figures but guess at them loan amount 300,000, short sale 190,000. Then there is 110,000 needed to be shown on 1040. Can a 982 help because it is resident's home?

Some direction would be nice but the government doesn't have it.

Help.

[jainen]

>>the government doesn't have it<<

The government has excellent instructions that cover just about every variation imaginable! CLICK HERE for a short introduction and links to the related pubs and forms.

Of course, the government can't give you all the key information you need, such as how title is held, the adjusted basis, whether it's a non-recourse loan, a qualified mortgage, a foreclosure, the specific reason for cancellation of debt, if bankruptcy is involved, etc. But the instructions will tell you what information you need to get from the taxpayer, and how to treat it. Also, just because an attorney says they will get a 1099-C doesn't mean the lender will agree, or that the numbers will be as expected.

[Pacun]

When 1099-C arrives, you enter the information on Form 982. If it is their main home and no taxes should be owed because of that 1099-C.

[bstaxes]

Thanks. Off to read more. The mind gets fuzzy as it gets older.

[Tax Prep by Deb]

When 1099-C arrives, you enter the information on Form 982. If it is their main home and no taxes should be owed because of that 1099-C.

Provided of course that they never refinanced and took out equity. If they did take out equity, then do the insolvency worksheet. It's not as cut and dry as it may seem.

Deb!