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Lev
Lev, Tax Advisor
Category: Tax
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i filed a chapter 7 bankruptcy in april of 2011. I had a 6

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i filed a chapter 7 bankruptcy in april of 2011. I had a 6 unit apartment complex that i gave up to the bank on that day. i did a 1031 exchange to puchase the apartments. I owed 106,000 thousand on the apartments. I bought the apartments for 192,000 but my adjusted tax basis for the apartments after i did the 1031 was 90,0000. how do i file my 2011 taxes? do I have a loss or a gain and how much based on the info provided?
Submitted: 4 years ago.
Category: Tax
Expert:  Lev replied 4 years ago.
Hi and welcome to Just Answer!

First of all - you should have debt forgiven.

The amount of debt forgiven is reportable on 1099-C - http://www.irs.gov/pub/irs-pdf/f1099c.pdf - generally is taxable, unless any exemption apply -- you should file a form 982 - to proof your exemption - and might exclude all or part of canceled debt from taxable income.


Following you should report:

Form 982 - www.irs.gov/pub/irs-pdf/f982.pdf

specifically - for rental property - check the box 1(d) - Discharge of qualified real property business indebtedness

, and put the forgiven amount on the line 2 and on line 4.

You should also reduce the basis of your real property by the amount excluded. Part II of form 982 is to reduce tax attributes.

 

Form 4797 - http://www.irs.gov/pub/irs-pdf/f4797.pdf - is to report the disposition of business property - rental property in your situation.

The foreclosed property is treated as if you sell the property for its far market value (FMV)

To calculate your gain or loss - you will use an adjusted basis reduced by the amount of debt forgiven.

 

Let me know if you need any help.

Customer: replied 4 years ago.
okay but.......... the bank took the property but has yet to foreclose on it. Instead they are renting out the apartments and have just sold the apartments to themselves mar 2012 for 60,000$. I have written to the bank and spoken to them and they will not issue me a 1099c for 2011. what now?
Expert:  Lev replied 4 years ago.
If the property was sold in 2012 - most likely you will receive form 1099C for 2012.
The sale price - most likely - will be reported as FMV of the property.
So your expected forgiven debt would be $106,000 (loan outstanding) - $60,000(FMV) = $56,000.
So your adjusted basis will be $90,000(current basis) - $56,000(forgiven debt) = $34,000

When you will report the sale transaction $60,000(assumed sale price) - $34,000(adjusted basis) = $26,000 - that will be your gain.

Please be aware that above are very raw estimate.
Most likely - you will need report all these on your 2012 tax return.
Customer: replied 4 years ago.

ok. i understand completely and will accept your answer after you clarify if I will b filing this in 2011 or I have to wait till 2012,

Expert:  Lev replied 4 years ago.
Based on your information - it is more likely that your will get form 1099C for 2012 and will report on your 2012 tax return.
If that is correct - nothing should be reported on 2011 tax return.
However - to be precise - I might suggest to contact the lender and verify that form 1099C was not issued for 2011.
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