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I had homes closed foreclosed on in 2010 and received 1099 c from Wells Fargo
I renovated these homes between 2005 & 2007 spending $1,100,000.00. borrowing 107,000.00 on each one they appraised for $135,900.00 in July of 2007 could not sell them attempted to rent them and half of the renteres failed to pay their rent, it was a most difficult time form 2000 to 2010. I attempted to get wells fargo to modify the loan to No avail they were charging me 7% interest if they would have just lowered it to 5% I could have made it work. now my CPA says I owe $50,000.00 tax. I lost my home and everything and currently living with my son (I am 73 years of age and live on SS). My CPA says I am not insolvent because a LLC that I have owns a building free of debt. I personally do not own anything except my car.
Is there anyway to not have to pay tax on those 1099 C's. The community bank that intiated the loans went out of business shortly after my loans were closed and sold them to wells Fargo, it was a shady deal.
You seem to be in a very difficult situation. If you do not do something it will only get worse. The problem is that these properties do not qualify for the exclusions available for home owners who live in their properties. They do appear to qualify for the exclusion for business obligations canceled. Here is a piece from the IRS. While it mostly deals with home owners/occupiers it also addresses qualified real property business indebtedness. It also provides links to other useful information. Perhaps your CPA is not aware of this. Print a copy and speak with him about it. Your other option is to file bankruptcy under Chapter 11 which automatically excludes the cancellation of debt income and can permit you to keep the LLC property.
Topic 431 - Canceled Debt - Is it Taxable or Not?
In general, if you are liable for a debt that is canceled, forgiven, or discharged, you must include the canceled amount in gross income unless you meet an exclusion or exception. However, canceled or forgiven debt is not considered income if it is intended as a gift or bequest.
A debt includes any indebtedness for which you are personally liable or for which you are liable only to the extent of the property securing the debt. Cancellation of all or part of a debt that is secured by property may occur because of a foreclosure, a repossession, a voluntary return of the property to the lender, abandonment of the property, or a principal residence loan modification. You must report any taxable amount of a debt that is canceled, as ordinary income from the cancellation of debt, on Form 1040 or Form 1040NR and associated sub-schedules, as advised in IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments (for Individuals).
Caution: If your debt is secured by property and that property is taken by the lender in full or partial satisfaction of your debt, you will be treated as having sold that property and may have a reportable gain or loss. The gain or loss on such a deemed sale of your property is a separate issue from whether any canceled debt also associated with that same property is includable in gross income. See IRS Publication 544, Sales and Other Dispositions of Assets, for detailed information on reporting gain or loss from repossession, foreclosure or abandonment of property.
If a federal government agency or an applicable financial entity cancels or forgives a debt you owe of $600 or more, you should receive a Form 1099-C (PDF), Cancellation of Debt, showing amounts and other information relating to the cancellation. The amount of canceled debt is shown in Box 2 of the form. Taxpayers may also receive a Form 1099-A (PDF), Acquisition or Abandonment of Secured Property.
Canceled Debts that meet the requirements for any of the following exceptions or exclusions are not taxable.
Canceled Debt that Qualifies for Exception to Inclusion in Gross Income:
Canceled Debt that Qualifies for Exclusion from Gross Income:
The exclusion for "qualified principal residence indebtedness," provides canceled debt tax relief for many American home owners involved in the mortgage foreclosure crisis currently affecting much of the country. The exclusion allows taxpayers to exclude up to $2,000,000 ($1,000,000 if married filing separately) of "qualified principal residence indebtedness".
Generally, if you exclude canceled debt from income under one of the exclusions listed above, you must also reduce your tax attributes (certain credits, losses, and basis of assets) by the amount excluded. You must file Form 982 (PDF), Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment), to report the exclusion and the corresponding reduction of certain tax attributes.
Refer to Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments (for Individuals), for more detailed information regarding taxability of canceled debt, how to report it, and related exceptions and exclusions. Additional information can also be found in Publication 525, Taxable and Nontaxable Income.