Help please - 1099a forum info not addressing my particular circumstances

[ursaminor]

Hi,
I just posted a similar thread in foreclosure, but it looks like a lot of 1099a discussion takes place in the Chap 7 forum, hope that is ok...

We file online each year. When a 1099a arrived (taxes were already done, just waiting to efile) we didn't sweat it because we didn't believe it would change anything given our 341 is to be held April 8, 2011.

When I plugged in the 1099a data today, BAM, it calculates we ended up owing over $500...so the 1099a did something here.

It looks like a lot of great info is out there about 1099a AFTER DISCHARGE but our 341 isn't until April 8 and discharge not until June. What do we do with this information now? I see mention of Form 982, or file extension until this is behind us, or amend when it is all over, etc.

Would it be wise to file without the 1099a, then amend the taxes with a 982 after discharge is in hand?

If you need 1099a info to assess, here it is:

Purchase price $135,500 in June 2005 (REFINANCED TWICE, BTW)
Date of foreclosure 9/29/10
Balance of principal outstanding $209K
Fair Market Value $251,000
Was borrower liable? NO

Thanks so much...

[ursaminor]

Hi Everyone...Anyone Have Any Help To Share? Thanks!

[LadyInTheRed]

Filing an extension won't help. It sounds like the foreclosure occurred before the bankruptcy, so I don't think the bankruptcy has any effect on the 1099a since you realized gain before bankruptcy.

I don't really know much about a 1099a and whether insolvency plays a role. Maybe somebody else does. Have you tried searching the IRS website? There is a lot of info there.

[tcreegan]

Hi ursaminor,

You have to report the amount on your tax return, but you shouldn't have to pay tax on it. It should get excluded from your income either by the BK or insolvency at the time of foreclosure. Go to irs.com and download Pub 908 and Pub 982 the details you need should be in those two.

If you use BK as the reason for exclusion, filing an extension until after discharge seems like the best path. Personally, I think filing before discharge will most likely fly under the radar but I wouldn't want to risk an audit or the IRS wanting back taxes and having to untangle that mess.

If insolvency applies, go for it. No need to wait.

Special rules (in your favor) apply to a taxpayers principal residence, so keep your eyes open for those.

Enjoy the IRS reading material HA!

Tom in Colo