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Jax Tax
Jax Tax, Tax Attorney
Category: Tax
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Experience:  JD, LL.M in Business and Taxation, IRS Enrolled Agent. Expert in Business and Tax Transactions
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This is a Virginia and federal tax question. I live in Virginia. My

Resolved Question:

This is a Virginia and federal tax question.

I live in Virginia.

My wife's declared Chapter 7 Bankruptcy
and was discharged in December of last year , 2011.

She cited only two debts namely her first and second mortgages which totaled together about $400,000 .

My wife's primary residence was foreclosed on subsequently and has since been sold this year.

We requested a tax filing extension for this year as we do not know how to we should deal with the two items
listed about namely the first and second mortgage amounts as far as tax treatment.

--
Submitted: 2 years ago.
Category: Tax
Expert:  Jax Tax replied 2 years ago.

Jax Tax :

When a mortgage is sicharged in bankruptcy, there is no tax treatment in regards XXXXX XXXXX personal residence. It is not listed on the return.


 


 

Jax Tax :

Based on what I am reading, it appears the forclosure happened after the BK.


 

Jax Tax :

In this case, you may receive a 1099C in regards XXXXX XXXXX mortgages not paid.

Jax Tax :

If this was her primary residence, she simply needs to include form 982 with her 1040 to claim the exclusion from income.


 

Jax Tax :

The 1099C is reported on form 982. The primary residence discharge box is checked and the amount on the 1099C is not taxed.

Jax Tax :

It will not appear on the State return.

Customer:

First and second ?


 

Jax Tax :

Both. Yes

Jax Tax :

Form 982 is very straight forward. Should not be any problem.

Jax Tax :

If the mortgage was discharged in the bankruptcy, you would not receive a 1099C so there would be no need to include it on Form 982.

Jax Tax :

If it was discharged in BK and you still received a 1099C, there is a box for that on the 982 as well.

Jax Tax :

If you are using some form of tax software to do your return, just make sure the form 982 is included and no amount shows on page 1 of the 1040 as "Other Income". If this happens, you did something wrong.


 

Expert:  Jax Tax replied 2 years ago.
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Expert:  Jax Tax replied 2 years ago.
Please let me know if you have additional questions.
Jax Tax, Tax Attorney
Category: Tax
Satisfied Customers: 1376
Experience: JD, LL.M in Business and Taxation, IRS Enrolled Agent. Expert in Business and Tax Transactions
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Customer: replied 2 years ago.

thanks Jax ,


 


Two more follow ups please :


 


In the case of the 1099c I assume she will get one because we recieved a note from the foreclose lawyers saying she owed money even after the Ch 7 discharge, which they knew about..


 


In the case of all the money she invested into the property over the years as mortgage payments i guess there are no deductions for her ?

Expert:  Jax Tax replied 2 years ago.

She will likely get a 1099C, correct. If she wants to double check, she can call(NNN) NNN-NNNNand ask the IRS for her wage reports for 2011.

As for the loss of investment. The tax code does not allow for any deduction for a loss associated with real estate used personally. So, no. There is no deduction.

Unfortunate, I know, but true.

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