Do I Owe Income Taxes From Foreclosure in Ch7?

[Haddit]

Hello!

I received my Ch7 discharge (!!!!!!!!!) in Georgia in 2009, and it included the foreclosure of my only personal residence. In early 2010, my mortgage company sends me what appears to be a summary of a 1099-A form for one of my two secured loans on the residence. They said they didn't send a 1099-A summary for the other loan, because I didn't pay any interest on it in 2009.

Anyway, I call the IRS to see if I need to file any forms with my 2009 form 1040 to show that I don't owe any taxes on the discharged mortgage debt. She says "what do you mean, don't owe any taxes?" She says I need to get a 1099-C from my mortgage company for both secured loans, then use Pub 4681 to fill out and submit form 982. She also says there could be major tax consequences from the discharge and cancellation of my mortgage debt, even though it was included in my Ch7 filing.

So, I call my mortgage company to get a 1099-C, and they said that they don't issue any 1099-C forms if the debt was included in bankruptcy. How am I supposed to complete form 982 if my mortgage company will not issue a 1099-C?

I just hope there aren't any tax consequences from the cancelled $129,000 mortgage debt. My attorney, who was excellent every step of the way, assured me that there wouldn't. I'm just not sure how to handle the income tax filing.

Any input is greatly appreciated!!!

[iv65536]

What date did you file Chapter 7 and what date was the home foreclosed?

[AngelinaCatHub]

I've never heard of that item as you did loose your house, right? That means you did not profit or make any money in it.

If you had a debt reduced by a percentage, let's say 50% and you kept the item then you had made out by that amount. someone is wrong and I would bet the IRS clerk is. 'Hub

[AngelinaCatHub]

OK, after looking this over, the 1099-A is a gain or loss statement. Might even help you in your return. Go here to check this out: http://turbotax.intuit.com/support/k...dits/3467.html

It is not that bad. 'Hub

Edit: Here is a better link: http://www.ehow.com/how_2125616_fill...orm-1099a.html

[AngelinaCatHub]

About.com this is as good as I'm going after since I am not a CPA. 'Hub

http://taxes.about.com/b/2010/02/27/what-to-do-with-form-1099-a.htm

[catleg]

http://www.irs.gov/individuals/article/0,,id=179414,00.html

[Haddit]

Thanks all

Thanks iv, Angelina, and Catleg!

iv, I filed for Ch7 in October '08, and was discharged in April '09.

Catleg, the reference to that mortgage forgiveness act seems to be what I needed. It's pretty obvious from that that I am not responsible for the forgived debt, and that I need only fill out lines 1a and 2 on the form 982.

I'm still not sure why my mortgage company insists that they do not issue a form 1099-C when the foreclosure is included in BK. But I suppose I don't need this document if the IRS doesn't.

Thanks all!

[ConfusedinOC]

You may have to pay taxes on the forgiven debt. Check this out:

http://money.cnn.com/2010/04/08/pf/taxes/taxes_mortgage_debt/index.htm

[Mensa1]

From IRS Publ 4681, pg 4, column 3

Bankruptcy

"Debt canceled in a title 11 bankruptcy case is not included in your income. A title 11 bankruptcy case is a case under title 11 of the United States Code, but only if the debtor is under the jurisdiction of the court and the cancellation of the debt is granted by the court or occurs as a result of a plan approved by the court."

In other words, debts cancelled as a result of your Bk disch are not taxable. You don't need a 1099-C you will just fill out IRS Form 982 and go as far as checking off question 1a: Discharge of indebtredness in Title 11 case. Also attach a copy of your Bk discharge, and you are golden from there.

IRS Form 982