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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7362
Experience:  15years with H & R Block. Divisional leader, Instructor
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I RECEIVED A 1099A AS A RESULT OF A FORCLOSURE ON A RENTAL

Customer Question

I RECEIVED A 1099A AS A RESULT OF A FORCLOSURE ON A RENTAL PROPERTY. THE AMOUNT IN BOX 2 IS LESS THAN THE AMOUNT IN BOX 4, AND BOX 5 IS YES. HOW DO I REFLECT THIS ON MY TAX RETURN?
Submitted: 4 years ago.
Category: Tax
Expert:  Robin D. replied 4 years ago.

HelloCustomer

Thank you for using Just Answer.

Since the property was business or income-producing property, the gain or loss would be reported on Schedule 4797. If the fair market value of the property (box 4) is less than the outstanding debt (box 2) and you are personally liable for the debt (box 5), the difference is the part of the gain on the foreclosure that you would have to report as ordinary income.

Your box 2 is less than box 4 and the A is marked that you were personally liable so you have a gain from the 1099A to report on the Form 4797 (Sale of Business Property).

 

Abandonment of the property can result in a loss for the amount of your adjusted basis in the property, and income for the amount of debt canceled. The income from cancellation of the debt would normally be reported on Schedule E.

 

I hope this information is helpful,

Customer: replied 4 years ago.

 

 

Robin,

 

I am sorry I am still not understanding...Since this was rental property, and the FMV is more that the amount owed in Box 2, does that mean I have to get to reflect this as a loss, and if so how?

Expert:  Robin D. replied 4 years ago.

On the Schedule E you will take your regular expenses and deductions for the time you still owned and had the rental property for the tax year. You will need to Fill In the 4797 to show the sell of the property. If you have a loss then you will be allowed to use that as usual. If you have a gain you will pay the ordinary income tax.

You have in a way sold the property for the amount listed in Box 2. All other information will be based on the 1099A amounts.

I must advise that you seek a professional in reporting at least the information dealing with the 1099A for your taxes this year. There are so many 1099As and Cs that were issued in 2009 due to the down turn in the economy. The recapture of the depreciation alone on the sale of rental property is usually enough to male most taxpayers use a professional. The 1099A has only complicated your situation.

I really hope this helps,

Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7362
Experience: 15years with H & R Block. Divisional leader, Instructor
Robin D. and 7 other Tax Specialists are ready to help you
Customer: replied 4 years ago.
Although I accepted your answer, I am still a little confused as to whether I am claiming a loss or a gain on the property. Remember, I said box 4 (FMV) was greater than box 2 (amount owed). Is this really a gain?
Expert:  Robin D. replied 4 years ago.

On just those numbers no, it would not be a gain. But this was rental property, so you will need to use the Form 4797 to show the sale. The recapture of depreciation that you took or could have taken will need to be shown. Based on what that is and the loss from the FMV against the Box 2 amount may show a gain in the end.

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