Have a Tax Question? Ask a Tax Expert
1.If the lender has forgiven the debt (refinanced and LOC amounts), then is the cost basis or recapture amount or even the fact that it was a rental unit 8 years prior to foreclosure, relevant?
2. In turbo tax, under "Less Common Income" section I can input the 1099C info directly. There it does not ask for any additional information like cost basis, at all. So which would be the right way?
If we were to address this issue without turbo-tax, is there a form we could fill out and attach? or any other way?
Don't worry! TurboTax will ask you about any debt you have had canceled. We will fill out the forms and perform all the calculations for you.
If you've already gone through the step-by-step interview and want to jump directly to the entry screen for this topic, follow these directions.
The support site assures me that the program will calculate the amount of qualified mortgage interest cancellation that is excluded for you.
Thanks. It helped a lot. I re-did the 1099C worksheet. At the end it re-directed me back to Sale of Home(gain or loss) section. I plugged in the accurate numbers to calculate the cost basis and it tells me that I have a taxable gain of $14000.
Capgain exclusion for a married couple from a sale of main home is 500K. Why is this gain of 14K taxable?
Is your basis less than the amount of the debt forgiven? What did TurboTax calculate your basis as? You have $106,400 of debt forgiven. Your original LOC was for $27,800. Did you use the entire line? You said you used $8,400 for home improvements. If the balance was used for other things, credit card payments, personal things, cars, etc., then that portion can't be forgiven. TurboTax may be using some sort of ratio for this. Let me know how much of the equity line was used, and what it was used for. Then I can answer better.
My original cost was $77555 inclusive of all fees. Improvements and additions worth $28000 after fire damage were offset by insurance money hence I did not claim them in turbo-tax. I had claimed a total depreciation of $14220 during the rental phase of the house. This I entered as recapture in turbo-tax. Only $8400 was used out of the HELOC for improvements before the bank curtailed that amount from $27800 to $8400 claiming depreciation in home prices.
The amount that Turbo-Tax says is taxable is exactly the amount i entered as depreciation recapture. Is the insurance claim money reportable to IRS even after the fact? Thanks