Tax Question Ch 7 Asset Case

[andyh_2000]

I had a ch 7 bankruptcy case this year that involved cash assets and a car that was taken by the trustee. Below is a summary of my case

1. My wife and I file tax jointly and were joint on the bk case.
2. Filed case in Jan 08
3. Discharged Sept 08
4. Case not closed yet, still awaiting close
5. Trustee took $20k cash assets from bank that were non-exempt
6. Trustee took and auctioned car that had no lien, sold for $3k that was not exempt
7. We did not reaffirm old house or a car with lien.

I have been reading the Publication 908 at IRS site and for some reason can just not get a handle on how I file all of this. Below are my questions, any help is appreciated.

1. The Pub 908 says
"Do not include on your return, the income, deductions, or credits belonging to the separate bankruptcy estate. Also do not include as income on your return, the debts canceled because of bankruptcy.'

For this, do I decrease my income by the $20k cash that was given to the trustee? If so, what form and where do I reduce this amount? About $5k of the amount was income in 08 or do I reduce the entire amount?

I am assuming I do not need to do anything about the car without the lien, does this sound correct?

2. For the house that was not re-affirmed, I paid on it through June. Can I still deduct the mortgage interest and prop taxes paid during this period?

Thanks in advance for any assistance

[Help!]

I had a ch 7 bankruptcy case this year that involved cash assets and a car that was taken by the trustee. Below is a summary of my case

1. My wife and I file tax jointly and were joint on the bk case.
2. Filed case in Jan 08
3. Discharged Sept 08
4. Case not closed yet, still awaiting close
5. Trustee took $20k cash assets from bank that were non-exempt
6. Trustee took and auctioned car that had no lien, sold for $3k that was not exempt
7. We did not reaffirm old house or a car with lien.

I have been reading the Publication 908 at IRS site and for some reason can just not get a handle on how I file all of this. Below are my questions, any help is appreciated.

1. The Pub 908 says
"Do not include on your return, the income, deductions, or credits belonging to the separate bankruptcy estate. Also do not include as income on your return, the debts canceled because of bankruptcy.'

For this, do I decrease my income by the $20k cash that was given to the trustee? If so, what form and where do I reduce this amount? About $5k of the amount was income in 08 or do I reduce the entire amount?

I am assuming I do not need to do anything about the car without the lien, does this sound correct?

2. For the house that was not re-affirmed, I paid on it through June. Can I still deduct the mortgage interest and prop taxes paid during this period?

Thanks in advance for any assistance

I'm in a similar position and here's my understanding of how this works. What the statement is saying is that if you receive a 1099A from a creditor for a debt they report as being written off, you are not required to count that amount as income. You do not get to deduct the amount taken by the trustee from your income.

[Help!]

Here's additional info. directly from the IRS (I called them):

(1) You should not receive a 1099A (for secured property debt) or 1099C (for unsecured debt) for any debt that was discharged through BK.
(2) If you do, simply add to your return IRS Form 982 (this is included in TurboTax and other electronic tax preparation software)
(3) NONE of the discharged debt is counted against you as income
(4) If you surrendered a home through BK, you must also complete Schedule D
(5) There is no way to deduct from income the loss of assets/cash given to the trustee to become part of the BK estate.
(6) The BK estate income, deductions, taxes, etc. are handled entirely by the trustee - your personal income tax return is completely separate.

[andyh_2000]

Thank you so much for the clarification. Should make filing a lot easier now!