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Merlo
Merlo, Accountant
Category: Tax
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Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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what if box 2 is less than box 4 on a 1099-A

Resolved Question:

what if box 2 is less than box 4 on a 1099-A
Submitted: 5 years ago.
Category: Tax
Expert:  Merlo replied 5 years ago.
Hello solsurf,

The amounts in box 2 and box 4 do not really matter except there is a difference in how you report this form, depending on how box 5 is marked. Is box 5 marked yes or no.

Was the home that was foreclosed your primary residence. How long did you own the home and how long did you live there?

Customer: replied 5 years ago.
box 5 is marked YES. It was my primary residence. I bought it in December 2002 and left in November 2007. (box 1 shows 07/03/08) I lived there the entire time.
Expert:  Merlo replied 5 years ago.
Hello again solsurf,

What did you originally pay for this home and what was the amount reported in box 4?

Customer: replied 5 years ago.
originally paid 286,000 and box 4 shows 481,389.59. box 2 shows 441,477.84
Expert:  Merlo replied 5 years ago.
Hello again solsurf,

Even though this was a foreclosure, for reporting purposes on your tax return it will be reported as a sale. The sale is reported on Schedule D.

You will report the sales price as being $481,390 which is what they show to be the fair market value. You will then report your basis in the home of $286,000. That will give you a gain of $195,000. However, since this was your primary residence, and since you owned and lived in the home for 2 of the past 5 years, you may exclude $250,000 from your gain (or $500,000 if you are married filing a joint return). When you claim your exclusion of $250,000 or $500,000, then you have no gain at all and you actually have a loss.

Losses on a personal residence do not qualify for a tax deduction, but you will have no taxable gain to worry about.

IF this was helpful please press the Accept button. Positive feedback is also appreciated.

Thank you.
Customer: replied 5 years ago.
Your reply shows me owning and living there for 2 of the past 5 years, is that a guideline for the gain exclusion? Just asking because I lived there from the time I purchased in Dec, 02 to Nov, 07, nearly 5 years, 4 of the past 5 years.
Expert:  Merlo replied 5 years ago.
Hello again solsurf,

Yes, what I gave you is the minimum requirements for a home to be considered your primary residence.

The IRS regulations require that you owned the home for at least 2 years and that you lived in the home for at least 2 of the 5 years immediately preceeding the sale. If you meet those requirements, the home is considered to be your primary residence and is eligible for the exclusion amounts of either $250,000 or $500,000.

If this was helpful please press the Accept button. Positive feedback is also appreciated.

Thank you.
Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
Merlo and 6 other Tax Specialists are ready to help you
Customer: replied 5 years ago.
Thank you so much for the info, I have tried to receive this answer for a while to no avail until now.
Expert:  Merlo replied 5 years ago.
No problem solsurf,

There is a lot of confusion among even some tax professionals on the proper reporting of a 1099-A form, but you have my assurance this is the correct way to handle it.

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