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Discussion:1099-C received 2 years after foreclosure

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Discussion Forum Index --> Advanced Tax Questions --> 1099-C received 2 years after foreclosure


Discussion Forum Index --> Tax Questions --> 1099-C received 2 years after foreclosure

Brian99j (talk|edits) said:

6 March 2014
It is a line of credit they received a 2013 Form 1099-C on from the bank that foreclosed on the property (same bank held the primary mortgage) in 2011. The funds from the LOC were used to improve the property. Does it get reported and backed out on the 2013 return and result in the need to amend 2011 return to increase the sales price by that amount?

Thanks for your input.

Ckenefick (talk|edits) said:

6 March 2014
Why wouldn't it just be COD in 2013?

Brian99j (talk|edits) said:

7 March 2014
Does it not qualify for the residential real estate indebtedness exclusion due to the fact this it was cancelled after the foreclosure?

Ckenefick (talk|edits) said:

7 March 2014
Not sure what you're referring to - QRPBI? QPRI? OP facts don't tell us much about the situation.

Brian99j (talk|edits) said:

7 March 2014
QPRI

Ckenefick (talk|edits) said:

7 March 2014
So, we're talking about a principal residence?

Brian99j (talk|edits) said:

7 March 2014
Yes. Sorry...forgot to mention that earlier.

Ckenefick (talk|edits) said:

7 March 2014
You would not go back and adjust anything. If this debt was not charged off in 2011, you would not have done anything with it. It simply sits there, in abeyance, until it is forgiven or until time goes by that we forget about it. You have to deal with it in 2013.

We've had plenty of posts regarding this issue and the timing mis-match between (1) disposing of the home and (2) the COD event.

Brian99j (talk|edits) said:

14 March 2014
Since it was charged off in 2013, 2 years after foreclosure, how can the QPRI exclusion be taken since their is no longer basis to reduce? After all the debt was used to improve the home.

Ckenefick (talk|edits) said:

14 March 2014
You only reduce basis under QPRI if you keep the house.

Brian99j (talk|edits) said:

14 March 2014
I recall that. It appears it was included in the gross sales amount along with the primary mortgage as the client knew it had been discharged back then. Not sure why it took so long for lender to issue the 1099-C.

Ckenefick (talk|edits) said:

15 March 2014
Maybe lender didn't discharge it in 2011, and maybe it wasn't discharged by operation of law in 2011, but was truly discharged in 2013.

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