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emc011075, Tax adviser
Category: Tax
Satisfied Customers: 3121
Experience:  IRS licensed Enrolled Agent and tax instructor
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We have a 1099 A, but no 1099 C foreclosure. The principal

Customer Question

We have a 1099 A for 2014, but no 1099 C for a foreclosure. The principal is 174,864 and the FMV was 188,000 and yes was checked for buyer liable. The actual basis of the property is around 148,000 and was recently sold for 160,000. For 2014 can we use
the 174,864 as the proceeds and 148,000 as the cost? And this gain is it eligible for the sale of personal residence exclusion - for myself as a single person under the 250,000 exclusion. If a 1099-C is given do I follow the cancellation of debt rules?
Submitted: 1 year ago.
Category: Tax
Customer: replied 1 year ago.
My email seem incorrect in your system it is***@******.***
Expert:  emc011075 replied 1 year ago.

Hi. My name is ***** ***** I will be happy to help you.

Your basis are 148K and your proceeds are lower of FMV or outstanding principle, which in your case will be 174.864. What the property was sold for is irrelevant because at that point the property already belonged to the bank, not you anymore. If you used the property as your primary residence for at leas 2 out of 5 years, yes you will qualify for the capital gain exclusion, you will be able to exclude the gain.

Now, regarding the cancellation of debt, form 1099C, the mortgage forgiveness act that allowed to exclude canceled debt from your principle residence was extended through 2014. Unless government decides to extend it again, than you will not be able to use the exclusion. Because the property was sold for less than the principle, you will get 1099C, most likely sometime next year.

Customer: replied 1 year ago.
Thank you so much I thought as much and needed that added support.
Expert:  emc011075 replied 1 year ago.

Good news. It looks like government already voted on the proposal to extend the mortgage forgiveness act for additional 2 years and it passed couple month ago. Which means, if you get 1099C this or next year, you will be able to exclude it.

Expert:  emc011075 replied 1 year ago.

It is now extended through 2016.

You're welcome. And if this answered your question, please take a moment to rate my response so that I may receive credit for assisting you today. However, if you need clarification, or want to discuss this issue further, let me know. Thank you.