Welcome Guest. Register Now!  



Poll: Rental Short Sale and Assumed Loan-Seller Got 1099-C
Be advised that this is a public poll: other users can see the choice(s) you selected.
Poll Options
Rental Short Sale and Assumed Loan-Seller Got 1099-C

Reply
 
LinkBack Thread Tools Search this Thread Display Modes
  #1 (permalink)  
Old 02-07-2014, 01:24 AM
Junior Member
 
Join Date: Sep 2013
Location: Elk Grove, CA
Posts: 1
Rental Short Sale on an Assumed Loan-Seller Got 1099-C

Hello,
I purchased a Las Vegas rental home in 2007 for $500,000 in a private sale. I 'informally' assumed the existing $450,000 loan from the seller. The loan I assumed was the original purchase loan. This not structured as an installment sale.
In 2012, my tenant moved out and I deeded the house back to the Seller (right before his Short Sale). The house sold for $180,000 to an unknown third party.
The Seller received a 1099-C for roughly $278,000 and he's naturally very upset. The Seller originally purchased the property for $575,000 and I understand that he wrote off the original loss of $50K ($575K-$550K) in 2007.
Over the years, I've been paying for the mortgage, taxes, etc. and reported it all on my Sch E with a note that the loan was still under the seller's name.
Can he amend his 2007 tax return? If he purchased it for $575K and sold short for $180K in 2013, wouldn't that mean a $395K loss to him? Which year would he report the additional loss? How can he offset or report the 1099-C for $278K issued in 2013? Thanks for your help on this. I don't him any more upset than he is, and I believe he is being given misinformation.


Last edited by tanicete : 02-07-2014 at 01:34 AM. Reason: Added more info.


Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #2 (permalink)  
Old 02-07-2014, 11:58 PM
Moderator
 
Join Date: Oct 2010
Posts: 5,258
Quote:
Originally Posted by tanicete View Post


#1;I purchased a Las Vegas rental home in 2007 for $500,000 in a private sale. I 'informally' assumed the existing $450,000 loan from the seller. The loan I assumed was the original purchase loan. This not structured as an installment sale.
In 2012, my tenant moved out and I deeded the house back to the Seller (right before his Short Sale). The house sold for $180,000 to an unknown third party.
The Seller received a 1099-C for roughly $278,000 and he's naturally very upset. The Seller originally purchased the property for $575,000 and I understand that he wrote off the original loss of $50K ($575K-$550K) in 2007.
Over the years, I've been paying for the mortgage, taxes, etc. and reported it all on my Sch E with a note that the loan was still under the seller's name.
Can he amend his 2007 tax return?



#2;If he purchased it for $575K and sold short for $180K in 2013, wouldn't that mean a $395K loss to him?


#3;Which year would he report the additional loss?


#4;How can he offset or report the 1099-C for $278K issued in 2013? Thanks for your help on this. I don't him any more upset than he is, and I believe he is being given misinformation.
#1; in general, some debts that are canceled are taxable income. Individuals who default on a debt are issued a Form 1099-C. Individuals receiving a 1099-C after they have already filed their taxes need to file an amended return of1040X to amend their return to report this income on1040 line 21. It is important to report Form 1099-C debt cancellation because the IRS also receives a copy of the same form from the lender.


#2; Short sale is a term to describe the act of selling your property below its original purchase price The Mortgage Debt Forgiveness Relief Act does not apply to rental properties - it's specifically for those who have had loan mods, short sales or foreclosures on their principal residences.basically, The tax liability on short sale starts ;what was your gain / loss on the short sale itself. This question has nothing to do with $395k shortage. It has to do with whathe paid for the property originally, including original loan (basis of the property), depreciation of the rental property if he took any, closing costs, and the selling price negotiated at the short sale reported on form 1099-S.for example: loan debt $400k,sale price $300k minus $70k closing costs minus initial purchase price $480k plus depreciation $60k = $190k loss.What was owed on the property does not matter. What the property was worth on the open market does not matter. On the contrary,short sale used to be that a seller had to pay income tax on the amount the payment was short. So, if you owed the bank $400k and you paid back only $230k when the sale closed, the $170k that you are short is taxed as ordinary income. You will get 1099 from your bank for $170K. the loss of $190k doesnt count here. Whatever income you had from 1099, you need to pay tax on it.

#3;Addtl loss?? I guess you mean the loss of $395K.As mentioned above in the example above, in 2013, $170K on 1099 needs to be reported on the 2013 return.

#4;when you receive a 1099C, you need to report it on your Form 1040 when you file your taxes; you must report amounts on the form as "other income" on line 21 of Form 1040. You must also list the type and amount of income on this line.



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
Ads
Reply



Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

vB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Short Sale smichaels916 Income 1 10-24-2013 09:49 PM
1099 Misc for Short sale incentive AngieZ Income 1 02-25-2012 10:21 AM
Short Sale Lender issues a borrower a 1099 MICHAELRJD Rental Real-Estate 1 11-11-2010 03:27 AM
Short Sale/1099-S mizhall Rental Real-Estate 0 01-26-2010 09:45 PM
Capital Gains on a Short Sale? 99980000 Capital Gains 0 04-08-2009 10:20 AM

Follow us on Facebook Follow us on Twitter Google Buzz Rss Feeds

» Categories
 
Individual
 » Income
 » IRA/Sep
 » Medical
 
Corporations
 » Payroll
 
Forum for CPAs
 
Financial Planning
 
 
 

» Recent Tax Q&A
No Threads to Display.