Discussion:Form 1099-A (Acquisition or Abandonment)

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Discussion Forum Index --> Tax Questions --> Form 1099-A (Acquisition or Abandonment)


Sid (talk|edits) said:

19 March 2007
Please advise on this issue. A client received a form 1099-A due to abandonment of a TimeShare property. The Balance of principal outstanding is $8K and the FMV is $8K. Client did not receive any form 1099-C. Client if personaly liable for the repayment of the debt.

My question is how, where will this information be reported on the client's income tax return.

Thanks Sid.

Sandysea (talk|edits) said:

19 March 2007
It is generally reported as other income on the 1040; not subject to se taxes....

Sid (talk|edits) said:

19 March 2007
Oops.. Client is personaly liable for the repayment of debt.

Sandysea, thanks for your input. Why is it other income. Again no form 1099-C was provided to the client.

Sandysea (talk|edits) said:

19 March 2007
It is not subject to SE tax; it is OI that is included to the recipient....

Sid (talk|edits) said:

19 March 2007
Thanks again, but which recipient do you mean? The lender or my client? If my client, this amount will increase his income by $8K which he did not make.

Sandysea (talk|edits) said:

19 March 2007
If the FMV of the property is on the 1099-A then this will offset the debt owed....the schedule D should show the loss on the foreclosure, if any.....if the 1099-A showed the balance owed and the FMV and they equal then no reporting requirements are necessary. If you are just indicating that the FMV of the property is equal to the debt owed, then it needs to be shown on another schedule to offset the income on line 21...does that make sense?

Sid (talk|edits) said:

19 March 2007
Sandysea thank a lot. Yes. The FMV is reported on the form 1099-A which is = to the Outstanding balance shown on the report as well.

Does it make any sense to show income since no income was received by my client.

Riley2 (talk|edits) said:

20 March 2007
In this case, since fmv equals balance owed, the $8,000 is treated as sales proceeds

Wheatley1 (talk|edits) said:

19 February 2008
I have a question. If the FMV is less than the principal outstanding, then does the taxpayer show on line 21 the difference of the two as income? Ex: FMV+25k-principal $32k=$7k on line 21?

Riley2 (talk|edits) said:

20 February 2008
If the debt is full recourse, the answer is yes. If the debt is nonrecourse, the answer is no.

Wheatley1 (talk|edits) said:

20 February 2008
If full recourse means 'is borrower personally liable' then yes. Also, what about if they were insolvent at the time of the acquisition? It seems that I have read that the income is not taxable to the extent of insolvency.

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