what did your CPA say?
The 1099-A has a FMV or sale price on it in one of the blocks. If the FMV of the home is more than the remaining debt, then you do not report this as income, but you may have to determine capital gain on schedule D. You would be entitled to take any capital gains exclusions, which generally are 250,000 of capital gain excluded from tax if you owned and lived in the home as your primary residence for two of the past five years (500,000 if filing a joint return). Since this is lost because you could no longer pay the mortgage, then the IRS allows a reduced capital gains exclusion if you lived in the home and owned it less than two years. Most likely this means you will not have to pay any tax .
If hte FMV or sale price of the home is less than the debt,then it is reported as taxable income.
Thank you for asking for additional information. My answer did nto cover the circumstances of getting for giveness because that was not included in your question.
But the form 982 is used to reduce the attributes in order to seek forgiveness of taxes owed as a result of debt forgiveness. The IRS, under the act, is permitted to forgive taxes.
However the basis is by adjusteing the attributes of the property based on the amount of your liquidity, sometimes called insolvency. The amount of your insolvnecy IF ANY, determines the adjusted attributes which can in effect result in less taxes owed, zero taxes owed, or no change.
The Schedule D I mentioned was for the condition that you would have a capital gain. Where there is no debt forgiveness because your property sold for sufficient income to pay off your debt. In this circumstances you would not be counting any forgiveness of debt as income, because there would be no debt forgiveness. Debt forgiveness only happens in the property did not bring in enough money to pay off the debt.
From 982 is only used when you have forgiven debt, and you seek tax abatement for the taxes on the forgiven debt. Every 1099-A does not have forgiven debt. Some 1099-A's relfect capital gains. Two different situations.
So tell me this: Was there enough money from the sale of the home, to pay off the debt?
block two has the amount of the loan.
Block 4 is the fair market value most generally the price at which the property was sold.
If Block 4 is greater than or equal to Block two, then there is no debt right off.
If Block 4 is less than block Two then you have a right off situation.