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I have to start my 2009 taxes soon (I did file an extention)

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and have many tax/accounting/legal questions...
I have to start my 2009 taxes soon (I did file an extention) and have many tax/accounting/legal questions, but I won't know all the questions until I'm actually preparing the return. What I am hoping to do is find a tax and law expert to answer my preliminary questions and then follow on as I go and answer the new questions which are bound to come up. Here is a capsule of my situation and the questions which I know I have: I have a real estate rental business in California, a sole proprietor business, and I have been filing taxes as a real estate professional for many years (I am licensed as an attorney but property management and development for my own account is all I do). I did my own taxes with turbotax and always showed a large loss which has carried over. Currently all my property is underwater and some is in foreclosure. I need to properly report the foreclosures, and the last sale, and minimize any gains, and preserve the loss for future use. I need lots of help.
Submitted: 8 years ago.Category: Real Estate Law
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Answered in 16 minutes by:
6/23/2010
Real Estate Lawyer: socrateaser, Lawyer replied 8 years ago
socrateaser
socrateaser, Lawyer
Category: Real Estate Law
Satisfied Customers: 40,144
Experience: Attorney and Real Estate broker -- Retired
Verified

Hi,

 

I'll be happy to try to help you sort things out, if I can. What is your question?

 

 

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Customer reply replied 8 years ago

questions-1) How do I report foreclosure transaction on taxes, especially when I dispute the lender's statement regarding value; 2) I was a R.E. professional in 2009-but I might not meet the hours requirements from now on, since my business is pretty much gone-can I still claim the carry-over losses against future income by me or my wife?; 3) In the event one or more lenders try to pursue me directly after foreclosing on the property, what effect would a bankruptcy proceeding have on my tax return-does bankruptcy create a gain?, does bankruptcy eliminate my loss carryover? 4) I now live in Michigan-do I have to report my California business on a Michigan return?

 

I'm sure your answers will lead to more questions-this is just a start.

Real Estate Lawyer: socrateaser, Lawyer replied 8 years ago

1. You report the loss on Form 4797. If you dispute the lender's 1099-C, then it will be up to prove to the IRS, via an appraisal or broker price opinion, that your valuation is to be preferred to that of the trustee's sale price.

 

2. Yes.The losses were incurred while you were in business and satisfied the requirements for the loss. The fact that you are no longer in busness is irrelevant.

 

3. Assuming that a lender can obtain a deficiency, if you file bankruptcy while you are insolvent (liabilities greater than assets), then no taxes are created by the discharge of indebitedness in bankruptcy. If you believe that you will not be insolvent, for example, because you have substantial retirement assets which while exempt from creditors in bankruptcy, nevertheless would give you a net positive balance sheet, then that deficiency balance could create taxable income, and you may want to file for bankruptcy before the lender sends you a 1099-C.

 

4. If you are a sole propietorship, then your business exists wherever you reside. Therefore it is not a California business, any longer. To the extent that you have gain or loss from business transacted "in" California (e.g., rent receipts), you must file a nonresident return. You would also file a Michigan return and obtain a credit against any California taxes paid.

 

Hope this helps.

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