Hi, yes, the fiscal cliff deal extended the 2007 mortgage forgiveness act to 2013 short sales, foreclosures and other forgiveness of dent
It's the forgiveness of debt thaqt's taxable
If the bank does forgive that debt they'll send you a 1099-C
They'll also send you a 1099- A for purposes of figuring any gains that might be there
two diferent issues
and yes turbotax (especially of you stick with the interview method) WILL generate the form 982 (for excluding the debt) and the 4797 for calculating any gain that night be there because of the depreciation recapture
I still don't see you coming into the chat session, so I'll move us to the "Q&A" mode. … Maybe that will help … (We can still continue a dialogue there, just not in real-time chat, as we can here)
But before I move us let me re-cap...
(1) If the debt is forgiven by the bank you should get a 1099-C
Thats's what's taxable, forgiven debt
(2) You ill probably also get a 1099-a where you MAY depending on the number, how much depreciation you have taken, etc pay capital gains
Ahhh there you are! Hi
I'm confused by your answer. At first you said the fiscal cliff...extends forgiven debt to 2013, then you said it's the forgiveness of debt that is taxable. Please explain. Thanks!
I thought the taxation on forgiven debt was what was extended. It's the bank that decides to forgive what is owed in the first place, not the government.
The fiscall cliff deal (the tax act finally signed at the last part of last year) DOES extend the taxation on forgiveness of bet through 2013
I meant the waiving of the taxation on forgiven debt was extended to 2013.
can't type today
extended through 2013... os if the bank forgives your mortgage indebtedness in 2013 you will use a 982 form with your 2013 taxes done in 2014 to waive that taxation
"The fiscall cliff deal (the tax act finally signed at the last part of last year) DOES extend the taxation on forgiveness of bet through 2013" - I thought the government, for the benefit of the underwater homeowner, basically said short sale homeowners don't owe tax on what is forgiven because they are too underwater to pay it anyway. I thought it was a break for the former homeowner.
BUT the bank will still send a 1099 (they want their tax write off for not getting their money back)
From the Fl Herald tribune:
Sarasota real estate attorney Nancy XXXXX juggled a half-dozen short sales during Christmas week, hustling to beat a year-end deadline so homeowners could receive a substantial tax break.
"It was mass chaos last week," XXXXX said. "A short sale is four times the work of a normal closing, so this was nothing short of a frenzy."
Though threatened by the fiscal cliff, the popular tax deduction on forgiven mortgage debt was extended for another year in the tax deal Congress passed late Tuesday night. That is good news for Southwest Florida, where short sales -- a transaction in which lenders allow a home to sell for less than the value of the mortgage -- have played a key role in the recovery of the region's real estate market. They accounted for a third of all residential deals in Sarasota and Manatee counties during the third quarter, according to analyst RealtyTrac Inc.
The deduction, which had been set to expire on Dec. 31, has saved some of the region's struggling homeowners thousands of dollars over the past five years.
Because of the looming expiration, short sellers had rushed to close deals before missing out.
"It's going to help a lot of people who were scrambling," Roger Piro, the newly installed president of the Sarasota Association of Realtors, said of the extension. "There are many short sales and foreclosures that need to work their way through the system locally."
Under the 2007 law, homeowners do not have to pay federal income taxes on mortgage debt forgiven by lenders on short sales, foreclosures or loan modifications.
Then you will use for 982 with your taxes to get the benefit of that extension
but there is still a process for doing that
But if they send me a 1099, it looks like income that came to me. Still don't get it.
back to your question... FORM 982
Okay, so basically the 1099 initially looks like my liability, but is counter balanced by my filing of the 982?
that's exactly right
the 982 is the ANSWER to the 1099
I still wouldn't have a gain after depreciation, since I think I depreciated about $6,700/yr for 7 years. Not doing that again. What a HORRIBLE decision....
Still climbing out of it. :/
So Turbo tax will "get" me?
Yes, MANY dont, it's just the procedural hoops they make you jump through
Many don't what?
it will generate the 4797 (capital gain or loss) and the 982 (exclusing of tax on firgiven debtr) if you just stick with the interview method and answer all the questions
Many don't end up with any kind of gain
You mean don't use the downloadable version, use the web version?
nope either one is fine
Thanks, Lane! You've been quite helpful. Just trying to get a jump on the tax analysis this year.
Glad to help... you'll be fine just, when you start turbotax...
no matter ehat the delivery method (download vs inline vs disk) ...
You'll have a choice to either go manual entry or interview (where it asks you all the questions)
use the interview method
it will ask you whether you sold a house, whether you had depreciation etc, etc