All these 1099 questions have me wondering..

[iv65536]

This is exactly the question I have been trying to get a proper answer to. House surrendered in BK (not re-affirmed) Chapter 7 filed/discharged. If the first and second 1099 us, do we report as taxable income to the IRS even though both mortgages discharged in Chapter 7 ? Or does it wipe out those 1099's..? Thanks, saw the "Chapter 11" part above and it kind of confused me.

Chapter 11 is a part of the BK code; Title 11 is the entire BK code.

[BCA2009]

OK, I went ahead and looked up the IRS references. This is all covered in Publication 4681. http://www.irs.gov/pub/irs-pdf/p4681.pdf

1099 A is informational. It is sent out on abandoned property. If you buy a house for 200K. Then in the future you owe 185K and the fair market value is 150K. You decide to wake away. The Bank is going to send you a 1099A. You now have a non-deductible loss of 200K. (you paid 200K for the house and got nothng for it).

Receiving a 1099A a does NOT represent a forgivness or cancellation of debt and there is therefore no income to claim on your tax return.

If the Bank cancels your debt (but it has not been discharged in BK), they will send you a 1099C. You now must report the forgiven debt as income. But it can be eliminated in most cases under the Mortgage Debt Relief Act of 2007for a qualified principal residence (form 982, part 1, line 1e) or for insolvency (form 982, part 1, line 1b).

If you have been discharged in BK, you will also receive a 1099C, but the income is eliminated by Form 982, Part 1, Line 1a.

I hope this helps.

[bulletproof77]

Thanks for all the great information to all posters. As I am slowly beginning to "get it"...my first and second mortgage (discharged in a Chapter 7) will be covered if I file Form 982 if receiving a 1099(a) or 1099(c)..I have a CPA believe it or not and even she is confused with the current wave of BK's and foreclosures.

[BCA2009]

Thanks for all the great information to all posters. As I am slowly beginning to "get it"...my first and second mortgage (discharged in a Chapter 7) will be covered if I file Form 982 if receiving a 1099(a) or 1099(c)..I have a CPA believe it or not and even she is confused with the current wave of BK's and foreclosures.

That is correct except for the 1099 A. It for information purposes only and does not require you to report anywhere on the 1040. The 1099 A is only an indicator from the bank that they have either took possesion of property that you have abandoned, or they have foreclosed, BUT NOT forgiven the debt yet. If they have forgiven the debt or the debt was discharged in BK, then thay would have sent a 1099C. But you are correct about the 1099 C.

[BCA2009]

I just wanted to add one more thing about 1099A's. Everything I have been discussing was related to a primary residence. Business property has different rules.

For a personal residence that you receive a 1099a and the box is checked that you are personally liable. You have a non-deductible loss. You paid $100K for the home, you abandoned it (or let it be foreclosed on). So you have received nothing for it. $0 proceeds -$100K basis = $100K loss. At this point you are still liable for the debt. So there is no income associated with the event.

You do not deduct non-deductible losses on Schedule D.

If this is business property, the loss may be deductible to a certian extent depending on a number of factors that are beyond the scope of this discussion. If that is the case discuss this with your CPA.

When/if the debt assoicated with the abandonement/forclosure is forgiven you should receive a 1099C and in most cases can avoid the income by completing for 982.

If you receive a 1099A and it indicates that you ARE NOT personally responsible for the debt. The only time I could imagine that 1099A would indicate that you are not personally responsible would possibly be in a non-recourse state. ThenI would treat it just like a 1099C and report it on form 982. Because in substance it it exactly like a 1099C (for a personal residence) and the eliminattion of the debt can be excluded from income under the same rules. Again, rules for business property are more complex.

This is the way I would handle things on my tax return. You (and your accountant) are responsible for your return. So please discuss your personal situation with your tax professional.