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R. Klein, EA
R. Klein, EA, Enrolled Agent
Category: Tax
Satisfied Customers: 3375
Experience:  Over 20 Years experience
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Client stopped making payments on their home at start of 2012.

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Client stopped making payments on their home at start of 2012. They moved out of home in March 2012. They received a 1099-A for their first mortgage and 1099-C on their HELOC. All HELOC proceeds went towards major improvements. Need to understand where to report both of these forms (not sure that 1099-A has to be reported at all) and what numbers to report.

The 1099-C reports 3/22/12 date of identifiable event with $133700 discharged.

The 1099-A reports 9/12/12 date of lenders acquisition/abandonment, appx $550000 in box 2, $475000 in box 4 and checked that borrower is personally liable for repayment. This is an Arizona loan, FYI.

Please help me to determine where/how to report these two forms.

Thank you.

Randalltax : Yes, since the HELOC was over 100k but it went to home improvements, it is protected under the home debt forgiveness laws.
Randalltax : The 1099c will not be taxable income, but Form 982 will be required with the return to show the reason thisis not taxable.
Randalltax : Yes, you do nothing with the 1099A forms for the tax return.

I just read my question and realized I didn't mention that this was a foreclosure (though it was probably obvious). Want to confirm this doesn't change your answer.


For the 1099-C, I'll report it on Form 982 Part I with nothing in Part II? And then just hold onto the 1099-A in case they send a 1099-C for that mortgage for 2013 or whenever.

Randalltax :

Foreclosure doesn't change the answer.

Randalltax :

Form 982 Use Part I

R. Klein, EA and 2 other Tax Specialists are ready to help you
Customer: replied 4 years ago.

FYI - this answer did not end up being correct. Because it is a foreclosure on a recourse loan, it is treated as a sale. The sale should be reported on Schedule D. This ended up being a non-deductible personal loss, but should still be reported on the return if for no other reason than to facilitate IRS matching against the 1099-A received. The simple answer that "it doesn't need to be reported on the return" was not accurate and more information should have been sought before this answer was given. Thankfully, I followed up with additional people, and ultimately the NATP Tax Research service because I didn't feel completely confident in this answer.