Discussion:Form 1099A and 1098 Mort Int

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Discussion Forum Index --> Basic Tax Questions --> Form 1099A and 1098 Mort Int


Discussion Forum Index --> Tax Questions --> Form 1099A and 1098 Mort Int

ZoomZoom (talk|edits) said:

16 February 2010
I have a client that has presented me with a 1098Mort Interest Statement from the lender with $54,000 as interest and over $8,000 in Real Estate taxes listed on it. This statement comes from a home they lost to foreclosure. I have asked them if they received a form 1099A and they haven't. I had them call their lender and both parties they spoke with told them the 1098 was the only thing the company was going to issue. This client had a $435,000 mortgage on the property and they know it was sold by the lender for just over $200,000. They paid none of the $54,000 or the $8,000, but without the 1099A which should have the mortgage interest also included I have no where to go with this thing. I have advised the client to ignore the 1098 since they never paid a cent on it. They are tempted use it on their return. Some advice would be appreciated.

Kevinh5 (talk|edits) said:

16 February 2010
take two aspirin and check back in the morning

DaveFogel (talk|edits) said:

16 February 2010
If the property was sold for $200,000 and the lender applied the sales proceeds to $54,000 interest and $8,000 taxes, wouldn't the client be entitled to these deductions? How is this any different than a regular sale of a residence?

ZoomZoom (talk|edits) said:

17 February 2010
Dave that is a good point and one I hadn't thought of. My office has since had another client come in with a situation that is similar but they not only had a 1098 for back interest but also a 1099A showing not only the principal balance forgiven, but the interest added also. My thoughts are since all debt is forgiven including the interest how can we place the amount on the 1098 on Schedule A?

DaveFogel (talk|edits) said:

17 February 2010
All of the debt isn't forgiven if the lender applies the proceeds from the sale of the property to the debt including accrued interest, or treats the FMV of the property as having satisfied part of the debt.

If the interest is forgiven, then you have a different situation because IRC ยง108(e)(2) states that no income is realized from the discharge of indebtedness to the extent that payment of the liability would have given rise to a deduction.

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