1099-A

[MAMalody]

I don't normally handle abandonment issues so I would like some help, if you don't mind. I have two clients with receipt of a 1099-A.

Client #1. This is a personal residence. As I understand it, I basically complete Form 982, line 1e and 2 for the forgiven amount and that is essentially it. He has not received a Form 1099-C. Because it is a personal residence the cancellation would not be taxable.

Client #2. This is a house he purchased, razed, then built. He hoped to sell/rent it out. No depreciation taken. As far as I know never held out for rent. I can't tell for sure if this would be handled in a similiar fashion as #1. Would this be 1d property on the 982? Since he has not received a 1099-C, does this get reported?

I have read Pub 4681 but am not up to speed on this. Any suggestions out there.

[Pacun]

I don't normally handle abandonment issues so I would like some help, if you don't mind. I have two clients with receipt of a 1099-A.

Client #1. This is a personal residence. As I understand it, I basically complete Form 982, line 1e and 2 for the forgiven amount and that is essentially it. He has not received a Form 1099-C. Because it is a personal residence the cancellation would not be taxable.

Client #2. This is a house he purchased, razed, then built. He hoped to sell/rent it out. No depreciation taken. As far as I know never held out for rent. I can't tell for sure if this would be handled in a similiar fashion as #1. Would this be 1d property on the 982? Since he has not received a 1099-C, does this get reported?

I have read Pub 4681 but am not up to speed on this. Any suggestions out there.

Property 1, report the sale on schedule D and report the loss as personal loss. When 1099-C comes, then you file 982.

Property 2. Gets reported on Schedule D and it seems to be in the same category as number 1 since your client never held it as investment and it was never in the martket for rent.

[jainen]

>>He hoped to sell/rent it out.<<

That seems unlikely to me. I find it hard to believe that anyone anywhere in the country anytime in the last five years had a genuine business purpose in tearing down a house and rebuilding it as rental property. The profit potential is completely absent. He might have had a misinformed intent to resell, but did he ever actually list it for sale (other than facing foreclosure)? Can he show that he paid a higher interest rate because he told the lender he would not occupy it as his own home?

[MAMalody]

Pacun, thanks. Just got some more docs and Client #1 does have a 1099-C. Just use the 982 then and skip the Schedule D?

Jainen, you may be correct. He has been working on this for a couple of years. It may have been a DIY project and he simply did not know what was going on, or he discovered what you said...no proft center there.

[Pacun]

Client 1 has to deal with two forms 1099-A and C. Schedule D deals with A and 982 deals with C. You need to file both in this case. Remember that the loss is personal so you don't get 3K losses each year.

[Pacun]

This is good information and you should read it (I have posted on another thread).

There is a time limit and it has to to with an "identifiable event". In tax court the IRS has lost because the banks issued the 1099-C too late.

go to www.ustaxcourt.gov and click on "opinion search" and type 1099-c on "text search". Then click on the last name and look for the hyperlink to the decisions.

T.C. Memo. 2011-233

UNITED STATES TAX COURT

THOMAS AND MONICA L. KLEBER, Petitioners v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 1545-09. Filed September 28, 2011.

and please read this other case.

T.C. Summary Opinion 2009-180

UNITED STATES TAX COURT

THOMAS JOSEPH LINKUGEL, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 28895-08S. Filed December 1, 2009.

[MAMalody]

Thanks for the info and link. I appreciate it.