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Greetings, I received a 1099C second equity line on

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Greetings, I received a 1099C for...
Greetings,
I received a 1099C for a second equity line on my primary residence,4/21/15; the same date the house was sold via short sale. When completing the insolvency work sheet, I was told to report my finances using that date, 4/21/15. Another source says I should use the day before, to show my financial Heath at that moment. If it's the day before, then I believe I'm insolvent due to my house, which on the 20th is still mine and part of my assets, as it hasn't closed yet. If not then my income for one day increased by $46,459.00 and presents a significant tax liability. Can I include my house, in my assets to reduce my liability?
Submitted: 1 year ago.Category: Tax
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Answered in 13 minutes by:
4/14/2016
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 1 year ago
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12,844
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Hi,...The day you use IS the day before the debt was cancelled....Here's the worksheet that you'll use (don't file WITH your taxes - keep for your records):...http://ashevilletax.com/wp-content/uploads/2015/10/Cancellation-of-Debt-Insolvency-Worksheet.pdf...If you'll notice the form, at the top, asks for "Date Debt was cancelled," which you'll see on the 1099-C....But the at the top of the column where you input the numbers, it says "Amount Owed Liabilities (debts) Immediately Before the Cancellation," and then on the bottom half, "FMV Immediately Before the Cancellation."...So its the value of all assets (FMV stands for Fair Market Value) against outstanding balance on all loans owed on the day BEFORE that date on the 1099-C....So although adding the fair market value of the house will hurt your prospects for insolvency, having the loan amount ON the house in that number too INCREASES the chance of insolvency....It's when your loan balances on that day are higher than the value (what you could get by selling/liquidating everything) of your assets, that you're insolvent....Said differently ... If you sold everything you owned and still couldn't pay off all the debt, you're insolvent....Hope this helps...Please let me know if you have any questions at all...Lane......I hold a law degree (JD, Juris Doctorate), with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in finance & tax, as well as CFP® and CRPS designations. - I’ve been providing financial, Social Security/Medicare, estate, corporate, both for-profit and non-profit, and tax advice, since 1986.
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Lane
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12,844
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Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986

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