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I have a capital gain from sale of business in NY that I sold on 6/08. I also had/have 7 investment properties here in FL that I stopped paying on in 10/07. The banks did not take any of the properties from us until 2009 however my accountant is asking if it is legal for tax purposes to say we abandon the homes in 08? We used a $140,000 in equity from our homestead in FL to fund some of these investments. If we can write off some of the loss it will greatly reduce my tax liability for my 08 taxes. I made no payments to banks at all in 2008 for any of these poor investments. Thanks for your help
State/Country relating to question: Florida Already Tried: nothing yet
Hello Rob, Unfortunately, you cannot write off any portion of the property losses until the year when the abandonment or foreclosure was officially enacted by the lender. The lender will send you a 1099-A form at the beginning of 2010 for the transactions that occured in 2009, and that is the only year that you can report any losses you had from these other investments. It's not much different then the sale of stock or any other investment. Even though you may have a stock that continues to decline in value, you cannot claim a loss until the stock is actually sold. The same principle applies to these investments. It does not actually become a loss until the lender officially takes back the property. The only thing you might have done differently is structure the sale from the business in NY as an installment sale, so you would have only had to report a portion of the gain in 2008. You could have set up the sale so that you received a 10% payment on the business in 2008 and then the balance in 2009, and you would have then been able to report 90% of your gain in 2009, and then receive some help with the offset from the losses on the other properties. If this was helpful please press the Accept button. Thank you Rob and let me know if you have more questions.
Accountant
25+ years tax consulting. Specializing in returns for US citizens living abroad