Have Tax Questions? Ask a Tax Expert for Answers ASAP
Hi and welcome to our site!For insolvency purposes the interest in retirement accounts means the total value of these account on the day the loan was discharged.That is the value of the ownership interest - not interest income.If you have a substantial value in your retirement account that may affect your insolvency - and such option might be not available for your situation.Was that your primary home or vacation home?Did you received form 1099C that the debt was discharged?
Vacation home - and yes we did receive 1099C from short sale - about $75K.
Another issue is that we have about $75K in equity in our primary home in Virginia - but had run up the equity line on our Virginia home in an attempt to keep the Florida home. Seems crazy that we paid $285K in 2006 and short sale last year for $150K. I carried as long as we could and then finally resolved that I had to do a short sale. Now I am in just as bad a situation.
You were insolvent immediately before the cancellation to the extent that the total of all of your liabilities was more than the FMV of all of your assets immediately before the cancellation.The total value in your retirement account is considered your asset - and if your have substantial assets accumulated in such account - that might affect your insolvency.The value of you primary home is also included into your assets - but your mortgage obligations fro both - primary and vacation home - are added to your liabilities.
You do have a loss on that sale - but if that is your personal vacation property - the loss may not be deducted.
I understand and was just hopeful for something that could help me with the $30K that Turbo Tax says I am going to owe the IRS.
Sorry for your situation. Unfortunately if that is not your primary home, but that is your personal vacation property and you are not insolvent - there is nothing could be done.
If the loans were in my name only for the Florida property - but we usually file a joint return, do you think it would be beneficial to file separate returns? Then could I claim insolvancy for just me? Would I only have to claim half of the value and loan on our primary residence - and only my retirement account.
That is correct - if you was the only responsible for the forgiven debt - insolvency is determined for you only.You must include only your assets. For jointly owned assets - you generally include the half of their value and the half of the loan if that property is used as a collateral.
Oh Lev - that may be my salvation. The loans were only in my name - so it is only my name and social that is on the 1099c. Half of any stock, cash, other debt, etc. - right? But all of the Florida situation.
Should I file by mail and include any other documents - or file electronically?
Do you know if the State of Virginia acknowledge the debt forgiveness as the IRS?
Please ignore the state question as I found my answer: Virginia fully conforms to the federal exemption from taxation of CODI attributable to insolvency, bankruptcy, or the Mortgage Debt Relief Act of 2007.
No need to include any documents unless the IRS specifically requested.Keep your insolvency worksheet with all supporting documents with your other tax documents.You may perfectly e-file - but may send a paper return as well.
Thank you Lev! If I have more questions this evening when I am doing the return - do I need to pay again? Since tomorrow is the IRS deadline, I do not need the trial.
Please be aware that experts do not have access to your account and may not discuss payment options. Such issues must be directed to customer service, Sorry - I simply do not know what type of service you contracted.I will address all your tax related issues if needed.
Please take a moment to rate my answer accordingly - so I would be credited for my work.