1099-A and 1099-C after foreclosure and/or bankruptcy

[Chrysalis]

I found this blog post today -- relevant to this discussion:

http://www.bankruptcymastery.com/the-tax-gotcha-when-debt-settled-outside-of-bankruptcy/

Looks like that site may be a wealth of info!

[Chrysalis]

I think the directions for Form 982 are better than the information in Publication 4681. That's why I pointed to the Form instructions.

Personally, I don't know anything about "tax attributes" at all! That is probably the reason that I am not a tax specialist, enrolled agent, or certified public accountant.

I hear you!

My mother is a CPA ~ and after spending all this time reading through fine print, it just further solidified my decision to NOT go that direction! Lol.

Funny ~ I've always been good at handling others' money. All of my jobs in the past involved accounting, one way or another. Just made a giant mess of our own, because so many emotions were involved.

I decided, after all, to not send another email to my CPA. We will be going to see him soon, and we can discuss it more then. I don't want to make it look like I am trying to tell him how to do his job or like I think I know more about this than he does (although maybe I do) ... also ... (maybe I don't). ;)

I will come back and update if I get to have a good discussion with him re: tax attributes.

[justbroke]

I gotcha, justbroke. I was trying to send him another email, and I like to understand what I'm talking about -- that's all. ;)

I think the directions for Form 982 are better than the information in Publication 4681. That's why I pointed to the Form instructions.

Personally, I don't know anything about "tax attributes" at all! That is probably the reason that I am not a tax specialist, enrolled agent, or certified public accountant.

[Chrysalis]

I gotcha, justbroke. I was trying to send him another email, and I like to understand what I'm talking about -- that's all. ;)

[justbroke]

"You must also reduce
your tax attributes in Part II of Form 982 as explained
under Reduction of Tax Attributes, later."

I've read through this section of publication 4681 and I do not understand what it means or how it applies to Chapter 7. I see no one talking about it here, but I need to know if anyone understands it before I share this information with my CPA (again). Thanks!

Your CPA just needs to read the directions for Form 982.

From IRS Form 982 Instructions...

Qualified principal residence indebtedness

1. Be sure to read the definition of qualified principal residence indebtedness in the instructions for line 1e on page 4. Part or all of your debt may not qualify for the exclusion on line 1e but may qualify for one of the other exclusions.
2. Check the box on line 1e.
3. Include on line 2 the amount of discharged qualified principal residence indebtedness that is excluded from gross income. Any amount in excess of the excluded amount may result in taxable income. See Pub. 4681 for more information. If you disposed of your residence, you may also be required to recognize a gain on its disposition. For details, see Pub. 523, Selling Your Home.
   
4. If you continue to own your residence after the discharge, enter on line 10b the smaller of (a) the amount of qualified principal residence indebtedness included on line 2 or (b) the basis (generally, your cost plus improvements) of your principal residence.

[Chrysalis]

"You must also reduce
your tax attributes in Part II of Form 982 as explained
under Reduction of Tax Attributes, later."

I've read through this section of publication 4681 and I do not understand what it means or how it applies to Chapter 7. I see no one talking about it here, but I need to know if anyone understands it before I share this information with my CPA (again). Thanks!

[Johnworker1]

Great thread. I received one last year and was worried but my accountant explained it (not as well as you did).

[tobee43]

funny thing is that many accountants don't know either! until now many have never even seen them. of course if they may know of them, but many have never dealt with them before.

[brennan]

Thank you so much for posting this -- our attorney couldn't even tell us what to do with the 1099A we just received!

[tobee43]

Thank you! (You should make this a sticky) Thanks to tobee43 for pointing me in the right direction!

lol! it is a sticky! and you are most welcome!

[zeezee]

Thank you! (You should make this a sticky) Thanks to tobee43 for pointing me in the right direction!

[chiwawa]

I will fill in line 2 the total amounts on the petition. The total liabilities on the "summary of schedules" or the amounts on form 1099-C ?
Thank you.

[HHM]

Title XI is bankruptcy. You don't need to show both. If you discharged the debt in BK, all you need to do is check box 1(a), fill in the total amount on line 2, and you are done.

Note, I assume we are talking about a 1099-C?

[LadyInTheRed]

I have read and re-read the explanation packet for Form 982 (Form 4681?) and it is damned confusing. On one hand it says if you're involved in a Title XI proceeding, then you're exempt, but it also says that you have to shor your insolvency, and when I run mine it looks like a portion will be taxable. Who knows.

--13for60

There are instruction with form 982 that should help.

Line 1b
The insolvency exclusion does not apply to any discharge that
occurs in a title 11 case. It also does not apply to a discharge of
qualified principal residence indebtedness (see the instructions
for line 1e on page 4) unless you elect to have the insolvency
exclusion apply instead of the exclusion for qualified principal
residence indebtedness

http://www.irs.gov/pub/irs-pdf/f982.pdf

They are two separate exclusions. Either the cancelled debt is excluded because the debt was discharged in bankruptcy or because you were insolvent at the time the debt was cancelled. If the debt was discharged in BK, insolvency doesn't apply.

ETA:

From Publication 4681:

Bankruptcy
Debt canceled in a title 11 bankruptcy case is
not included in your income. A title 11 bankruptcy
case is a case under title 11 of the United
States Code (including all chapters in title 11
such as chapters 7, 11, and 13), but only if the
debtor is under the jurisdiction of the court and
the cancellation of the debt is granted by the
court or occurs as a result of a plan approved
by the court.
How to report the bankruptcy exclusion. To
show that your debt was canceled in a bankruptcy
case and is excluded from income, attach
Form 982 to your federal income tax return
and check the box on line 1a. Lines 1b through
1e do not apply to a cancellation that occurs in
a title 11 bankruptcy case. Enter the total
amount of debt canceled in your title 11 bankruptcy
case on line 2. You must also reduce
your tax attributes in Part II of Form 982 as explained
under Reduction of Tax Attributes, later.

http://www.irs.gov/pub/irs-pdf/p4681.pdf

[13for60]

I have read and re-read the explanation packet for Form 982 (Form 4681?) and it is damned confusing. On one hand it says if you're involved in a Title XI proceeding, then you're exempt, but it also says that you have to shor your insolvency, and when I run mine it looks like a portion will be taxable. Who knows.

--13for60