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I am in California so want a California expert to answer do

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not answer if not a...
I am in California so want a California expert to answer do not answer if not a California tax expert. You will not get paid unless you are practicing in California.

Background: I bought a home in 2006 for $285,000, I lived in the home for 3 months, bought another home and moved into it, and then started renting this house and later did a Purchase-contract on it and then this year took it back with a $20,000 buy-out/cancellation payment from the buyer. 

RESTATED: I paid 285,000 for the SFH property, I sold it for $280,001 later (2007-2010) on a purchase-contract. This year I took it back with a one time payment for $20,000 as a cancellation payment as of 12/28/2010. I continued the rental contract with the tenants this year starting Jan 1,2010. I brought it back  (the property) into my taxes return at a basis of $260,000 (280,000 – 20,000/cancellation payment) and have started deprecating it this year. The house is worth about $170,000 to $190,000 I owe the bank $210,000, lost all my investment except the $20,000/cancellation payment. My plan in 2012 is to let the bank foreclose on the house, it is underwater by $20,000-30,000 and move on.

Question 1: I will have a huge business loss of about $50,000 ($260,000new basis-$210,000MyLoan+recaptured depreciation).    Is this right? The property has been a business venture for 5 years. 


 Question 2: If the bank gets $190,000 there will be a $30,000(-+) loan deficiency which the bank will to eat (purchase-money loan) and give me a 1099-c for the deficiency.     Can I offset this fathom income $30,000(-+)  1099-c income with my loss.

Submitted: 6 years ago.Category: Tax
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Answered in 3 days by:
5/20/2011
Tax Professional: Zip Taxes, Tax Preparer replied 6 years ago
Zip Taxes
Zip Taxes, Tax Preparer
Category: Tax
Satisfied Customers: 156
Experience: CTEC Licensed / Mgmt Experience with H & R Block... Self Employed since 1986 Experienced in all Scheds
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Zip Taxes :

Welcome to Just Answers, I will do my best to Answer your Question.

Zip Taxes :

The banks loss... will be a "gain" in the State Franchise Tax Boards and the IRS "eyes"

Zip Taxes :

There's only one exemption, that's owner occupied.

Zip Taxes :

If this is under a business entity, such as an LLP or LLC or a Corp of any type, you would be able to expense against the gain. But if you are sole owner, then you will have to expense out what was spent against the gains.

Zip Taxes :

Due to the complexity of your return, I recommend a CPA or an EA to complete your taxes. They have ways to help with eliminating your liability, even if you are insolvent, they will be able to bring it down to "maybe" to zero.

Zip Taxes :

But, to start off you will be liable until the financial math is applied which can not be answered in this type of forum.

Zip Taxes :

A complete financial profile and the computerized calculations will be the only way to provide you with the information you need to file.

Zip Taxes :

Thank you for your patients on waiting for an answer.

Zip Taxes :

I live in California, I practice in California, but all tax preparer are qualified to answer Federal Tax Question and most states as well except for states that require separate licenses such as California.

Zip Taxes :

Take care and I hope the best for you.

Customer :

what does this mean?

Customer :

"But if you are sole owner, then you will have to expense out what was spent against the gains."

Customer :

I am a sole owner.

Zip Taxes :

What ever it cost you to obtain the property, as well as maintain the property can be expensed against any income on the property including a 1099c (if you receive one)

Zip Taxes :

I have to go to a hearing for a client... I will check email later in the day.

Customer :

thnaks

Zip Taxes
Zip Taxes, Tax Preparer
Category: Tax
Satisfied Customers: 156
Experience: CTEC Licensed / Mgmt Experience with H & R Block... Self Employed since 1986 Experienced in all Scheds
Verified
Zip Taxes and 87 other Tax Specialists are ready to help you
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Tax Professional: Zip Taxes, Tax Preparer replied 2 years ago
Hello, you are asking two questions here so let's break it down... First of all, I'm a California, Tax Preaparer, Realtor, licensed mortgage officer and a paralegal if there's a deficient loan amount of the sale verses what you owe, then yes there's a gain to you for 30,000 but your business expenses could eat that income up anyway.
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Zip Taxes
Zip Taxes
Zip Taxes, Tax Preparer
Category: Tax
Satisfied Customers: 156
156 Satisfied Customers
Experience: CTEC Licensed / Mgmt Experience with H & R Block... Self Employed since 1986 Experienced in all Scheds

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