How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask BK-CPA Your Own Question

BK-CPA
BK-CPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 793
Experience:  Owner of a CPA firm
Type Your Tax Question Here...
BK-CPA is online now
A new question is answered every 9 seconds

Foreclosure Tax Question for 2009 Tax Return

Resolved Question:

I lost my 4-plex to foreclosure due to personal circumstances. I originally purchased the 4-plex on 9/1998 for $235K, the 4-plex fair market value (FMV) on 10/2009 was around $275K and the outstanding loan was at $183K when the bank foreclosed. With so much equity the bank was unwilling to work with. Is there a way to recoup the $95K loss, between the outstanding loan amount and the FMV, and carry it as a loss on my tax return?
Submitted: 3 years ago.
Category: Tax
Expert:  BK-CPA replied 3 years ago.

BK-CPA :

Hello and thank you for your question.

BK-CPA :

Your foreclosure is generally treated as a sale for income tax purposes for which gain or loss can be recognized (IRC 1001).

BK-CPA :

The four-plex was a rental property, correct?

Customer:

Yes

BK-CPA :

Do you know whether or not your loan was a recourse loan? Recourse loans are ones where you are personally liable for the debt, meaning not only can the bank foreclose, but they can come after you for the difference.

Customer:

Turbo Tax is only letting me show a "gain" between the loan amount and my adjusted tax basis. But it is not letting me show the loss between the FMV

Customer:

Yes, the loan was a recourse loan

BK-CPA :

The amount realized will be the loan amount with a recourse loan in this case because the fair value of the property exceeds the loan amount. You should generally be entitled to the difference between what you owe and what your house is sold for, noting the bank will be eating up equity in the foreclosure process with fees, etc.

BK-CPA :

Your gain (loss) is equal to the amount realized (loan amount) less your adjusted basis in the property.

BK-CPA :

Your basis in the property will be your initial cost basis (what you paid originally) less the years' depreciation adjustments (IRC 1012, 1016).

Customer:

So the loss between the FMV and the loan amount is not considered because it was a recourse loan?

BK-CPA :

Your gain then will be subject to IRC 1250 recapture and may be taxed at 25% generally (IRC 1).

BK-CPA :

The loss between the fair market value and the loan amount isn't a loss to you. That is why it isn't considered.

Customer:

Ok, Thank you

BK-CPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 793
Experience: Owner of a CPA firm
BK-CPA and 6 other Tax Specialists are ready to help you
Expert:  BK-CPA replied 3 years ago.
Thank you!!

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Last | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
 
 
 

Meet The Experts:

 
 
 
  • Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
< Last | Next >
  • http://ww2.justanswer.com/uploads/KU/KUMI95/2013-9-30_195031_kumar.64x64.jpg Wallstreet Esq.'s Avatar

    Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
  • http://ww2.justanswer.com/uploads/CU/Cuttinggirl/2011-10-29_03719_wcrop2.64x64.jpg Wendy Reed's Avatar

    Wendy Reed

    Enrolled Agent

    Satisfied Customers:

    3052
    15+ years tax preparation and tax advice.
  • http://ww2.justanswer.com/uploads/CATax/2009-08-04_204548_Mark.jpg Mark D's Avatar

    Mark D

    Enrolled Agent

    Satisfied Customers:

    985
    MBA, EA, Specializing in Business and Individual Tax Returns and Issues
  • http://ww2.justanswer.com/uploads/IN/insearchoftheanswer/2013-8-16_0233_attorney.64x64.jpg Richard's Avatar

    Richard

    Tax Attorney

    Satisfied Customers:

    3229
    29 years of experience as a tax, real estate, and business attorney.
  • http://ww2.justanswer.com/uploads/MY/MyVirtualCPA/2012-7-5_44024_cookmegan1.64x64.jpg Megan C's Avatar

    Megan C

    Certified Public Accountant (CPA)

    Satisfied Customers:

    6121
    Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
  • http://ww2.justanswer.com/uploads/JG/jgordosea/2012-6-7_43138_GordosVeritas.64x64.jpg jgordosea's Avatar

    jgordosea

    Enrolled Agent

    Satisfied Customers:

    2783
    I've prepared all types of taxes since 1987.
  • http://ww2.justanswer.com/uploads/OZ/ozaukeecpa/2012-6-7_193219_Picture1croppedandshrunk.64x64.jpg MequonCPA's Avatar

    MequonCPA

    Certified Public Accountant (CPA)

    Satisfied Customers:

    2231
    CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.