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Cash Flow Planning for Life

Helping you reach your personal & professional financial goals.

IRS Form 1099 A

This is the sixth tip in our series 7 Things You Should Know About the Tax Consequences of Debt Forgiveness which is also available as a free eBook from your Naples Accounting Firm.

If your home has been foreclosed on by the bank, you will typically receive another one of the 1099 IRS Forms. This one is IRS Form 1099- A and it will come from your lender. This will contain several components of relevant information. You will need the information on Form 1099-A to report the foreclosure properly on your tax return.

Here is some important information to know about a foreclosure as it relates to your taxes:

A foreclosure is treated as the sale of property and the former property owner will need to calculate their gain or loss on the property. However, unlike a normal sale, there’s no “selling price,” and this is where the Form 1099-A comes into play. To determine the selling price, you would need to use either the fair market value of the property or the outstanding loan balance on the property for the selling price. These figures are both reported on Form 1099-A.

To help you navigate through the form:

  • The outstanding loan balance is found in Box 2
  • The property’s fair market value is found in Box 4
  • The date of the foreclosure is indicated in Box 1 – This will be used as the date the property was disposed of (that is, the “sale date”)

Another important piece of information on this form is if the loan was a recourse or a non-recourse loan. If the bank has checked “yes” in Box 5, which asks “Was borrower personally liable for repayment of the debt?”, then the loan was 7 Things You Should Know About the Tax Consequences of Debt Forgivenessprobably a recourse loan.

IRS Form 1099-A can be found here: IRS.gov/pub/irs-pdf/f1099a.pdf

If you have further questions about 1099 IRS forms and how they relate to your income taxes, please contact us online, call (239) 384-9688, or download our FREE eBook 7 Things You Should Know About the Tax Consequences of Debt Forgiveness. When it’s time for us to meet, here is a good way for you to prepare before meeting with your tax planner.

-Mark

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This information is based on facts, assumptions and representations as stated and authorities that are subject to change. We will not update this information for subsequent legislative or administrative changes of future judicial interpretations.

LEGAL NOTICE AND DISCLAIMER: The information within this post is for informational and educational purposes only and is not tax advice and should not be used as such. The facts of each individual situation can have significantly different outcomes when applying tax law. The hiring of a CPA is an important decision not to be based solely on advertisements.

1 Response

  1. #7 – Filing Your Foreclosure/Short Sale Taxes | Cash Flow Planning for Life Says:

    […] is possible for you to receive multiple tax forms (1099A & 1099C) in the same year. This is based on a variety of scenarios, depending on how you file […]

    Posted on April 7th, 2011 at 10:53 am

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