Trying to understand 1099A - How is this income?

[dtu1966]

I need help! I had my home foreclosed on in 2008 and I received a 1099A from my Mortgage Company. I do not understand how this can be considered a financial gain since I lost the home due to a disability and the mortgage company refused to work with me. Here are the details on the 1099A; Box #1: Date of acquisition 10/14/2008; Box #2 Balance $131,259.44; Box #3 Fair Market Value $75,820.00; Box#5 Was borrower personally liable for repayment of the debt? x NO; Box #6 Description of property: Has the address of the property. My question is how does this indicate that I had a financial gain and will I be responsible for taxes? How do I file my taxes this year, typically I use Turbo Tax...Thanks! Darryl U.

[AngelinaCatHub]

Daryl, this is a good question for a CPA and it would behoove you to have one fill out your taxes this year particularly. Are you currently in bk? I believe that unless the bank forgave all or partial debt to you and you still owned the property, there is no gain. Check you land records as maybe you still own the house? Then pay the tax and keep the house. 'Hub

[justbroke]

My question is how does this indicate that I had a financial gain and will I be responsible for taxes? How do I file my taxes this year, typically I use Turbo Tax...Thanks! Darryl U.

Generally speaking, you'd use Publication 523 to calculate your capital gain (Schedule D), just as you would if you sold your home.

HOWEVER, I highly recommend that you see a tax accountant (even H&R block). If you use Block make sure you call ahead and ask "who is the best person in that office at 1099-As for canceled debt?". Make sure they answer you and make sure you know that person's schedule. (I did this the second year I had Block do my business taxes, because not all of them are savvy. Most of them are no better at taxes than I am... actually... most of them are worst at taxes than I am. ).

If you're in Bankruptcy or otherwise insolvent, there's a process in Publication 523 for declaring such, and you won't be responsible.

Also the Mortgage Forgiveness Debt Relief Act of 2007 may apply.

AGAIN, see a tax specialist! It will be worth it.

[fltoo]

The Mortgage Forgiveness Debt Relief Act 2007 and Debt Cancellation


Search this act and find the IRS info on it. The IRS thoroughly explains what kind of forgiven debt is not taxable.

In a nutshell, if the house is your principal residence or a loan is secured against the property for improvements...............the forgiven debt is not taxable. There are exceptions, but most foreclosed principal residences apply.

Of course, debt discharged in BK also applies.

I will try to find the publication and post it. It is straightforward and easy to understand.

[fltoo]

Here ya go

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