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Barrister
Barrister, Lawyer
Category: Real Estate Law
Satisfied Customers: 33802
Experience:  15 years real estate, Realtor. Landlord 26 years
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In October I asked you about my Deed In Lieu and the tax

Customer Question

Hi, In October I asked you about my Deed In Lieu and the tax issues. You stated that I would receive a 1099-c and today I received a 1099-a and I really don't understand. Thanks
Submitted: 10 months ago.
Category: Real Estate Law
Expert:  Barrister replied 10 months ago.

Hello again,

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Generally someone would receive a 1099-C if the lender wrote off any forgiven amount on their taxes as a loss. The borrower then has to recognize that as income and pay taxes on it. But if you got a 1099-A, that is just a notice that the lender has retaken possession of the property as a secured party. You don't do anything with this with regard to your taxes for the year, you just keep it in your records.

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So at this point, the lender may not issue a 1099-C as it is entirely up to them as to whether they do so or not and this is a good thing for you..

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thanks

Barrister

Customer: replied 10 months ago.
Holy Crap I was really scared I was going to owe a ton of taxes. THANK YOU !!!!
Can I ask why "this is a good thing" for me as you stated ?
Expert:  Barrister replied 10 months ago.

You are very welcome. It is a good thing because you didn't get a 1099-C...yet... So you don't owe any "cancellation of debt" income tax. The IRS says that they can issue a 1099-C for up to "36 months from an identifiable event". So I take that to mean that once you pass that 3 year window since the DIL, you are in the clear if they haven't issued a 1099-C.

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thanks

Barrister

Customer: replied 10 months ago.
Ok thanks.. Just one more question. If it's a DIL can they treat it like a short sale and wait until the property is sold. I know it's up for sale and not sold yet as far as I know. Thanks
Expert:  Barrister replied 10 months ago.

Yes, the amount outstanding when you did the DIL is the amount that they agreed to "purchase" the property from you for. They then calculate what the fair market value of the property is through an appraisal, or a sale, and then that is the difference that is potentially cancellation of debt income...

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thanks

Barrister

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