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Charles Markham
Charles Markham, EA, MST, USTCP
Category: Tax
Satisfied Customers: 769
Experience:  IRS Enrolled Agent, US Tax Court Practitioner
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I am preparing a return Massachusetts resident who received

Customer Question

I am preparing a return for a Massachusetts resident who received a 1099-C but qualifies for the federal insolvency exception. However, the state return is recording the amount that the bank received in the short sale as income.
Submitted: 2 years ago.
Category: Tax
Expert:  Charles Markham replied 2 years ago.
Hello, I am a Massachusetts accountant. Massachusetts DOES recognize the general insolvency exception of IRC 108. It did no conform to the homeowner's principal residence exclusion which was not an insolvency exception.
Is this a principal residence? Or a rental property?
Or does this information help you eoungh.
Please follow up with your questions and comments until you are satisfied. My hunch is that you have really good software (like ProFx) that you tend to really trust and therefore are surprised by the answer you are getting, and don't disregard it lightly.
From what I am hearing (given your couple of sentences) client should not be paying taxes.
Customer: replied 2 years ago.
I am using ProSeries tax software if that helps. What is coming over to the Massachusetts return is the amount of the total debt that was repaid to the lender
Expert:  Charles Markham replied 2 years ago.
I use ProSeries, too! You must be filling out all the 1099-C worksheets, etc. Those are very complex, I normally skip those.
Is this a principal residence? if so, then ProSeries may be trying to make it taxable since MA does not follow that exception. In that sense, you are giving the software "too much" information.
Is this a rental property?
If you are willing, I might advise that you consider entering slightly differently in ProSeries. For example, if you are convinced that the insolvency exception applies, why just enter it on Form 982 and check the box insolvency and then fill in the rest of the form? NONE of the 982 carries to MA.
Like I said, ProSeries is trying to take info from the Insolvency worksheet and 1099-C and that junk and make sense of it.
Just so you know, none of that gets transmitted to the IRS or MA. The only thing that they see is Form 982. They get none of that detail in the efile transmission, Sure if you print out on paper, you can send it all in....
Just saying...but now I know what's happening...something you are doing on that sheet has got ProSeries confused.
Here's an offer. Since we both use the same software. You can save a copy of that file (Change the SSN to###-##-#### ***** the name to Jane Doe, etc.
Then you could upload that file to me, and I bet I could fix it in like 2 minutes, I could then tell you what I would suggest fixing in the file. You would then decide if you do or do not wish to do that. Like I said, personally I would skip all those worksheets, but if you prefer them, I still bet I could adjust them accordingly. I am pretty good with COD stuff.
Customer: replied 2 years ago.
How do I upload the file to you?
Expert:  Charles Markham replied 2 years ago.
There is a feature called "Offer additional services". We can do this offline with the site's blessing. I think the simplest thing to do would be for you to give me your phone number and for us to work this out over the phone. I would "propose additional service" in the forms of a phone call. You would give me your phone number. (Which is private) and we could figure it out from there. I am sure there are other ways to handle but honestly I am not an expert user of the site and this is just what comes to mind. Another option could even be a screen share onto your ProSeries but I am not 100% sure I can fix this real time, but I might be able to.
Anyway, so if that sounds okay to you, I would then "Propose additional service" which would be a phone call. There is a minimum charge. I think it's like five bucks. I don't do this for the money and don't care much about that.