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I had borrowed $50k against my 401k in 2008 to purchase a…

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I had borrowed $50k...

I had borrowed $50k against my 401k in 2008 to purchase a home. In 2012 I sold the home and had a loss of more than $150k. last year (2016) I closed my 401k account and therefore the balance of the loan (~$41k) was reported to IRS as an income. I am doing the 2016 tax returns now and am wondering if there is a form or a way to claim the loss?

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Submitted: 7 months ago.Category: Tax
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Answered in 4 minutes by:
9/28/2017
Tax Professional: Barbara, Enrolled Agent replied 7 months ago
Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 5,993
Experience: 20+ years of experience in tax preparation; 30+ years of experience as a real estate/corporate paralegal.
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Welcome to Just Answer. My name is ***** ***** I will be happy to assist you.

If the property you sold was your primary residence, you cannot claim the loss.

I wish I had better news for you.

Please let me know if I can assist you further.

Thank you and best regards,

Barb

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Customer reply replied 7 months ago
At the time I sold it was not my primary resident.
Tax Professional: Barbara, Enrolled Agent replied 7 months ago

Was it a rental property?

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Customer reply replied 7 months ago
for a short period of time
Tax Professional: Barbara, Enrolled Agent replied 7 months ago

Did you report the sale of the property on your 2012 tax return?

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Tax Professional: Barbara, Enrolled Agent replied 7 months ago

You cannot claim the loan from your 401K that was not repaid as a loss on your tax return. The IRS considers the loan as income if it is not repaid.

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Customer reply replied 7 months ago
I repaid part of the loan almost $10k
Tax Professional: Barbara, Enrolled Agent replied 7 months ago

Does the 1099-R you received show the correct amount that remained unpaid?

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Customer reply replied 7 months ago
it does.
Tax Professional: Barbara, Enrolled Agent replied 7 months ago

Then that amount is income to you. You received the money when you borrowed it and did not pay all of it back. Whatever amount you did not pay back is considered income.

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Customer reply replied 7 months ago
there is no way around this to zero it out?
Customer reply replied 7 months ago
I borrowed $50k and paid pack $10k. I should be able to claim the $10k in that case??
Tax Professional: Barbara, Enrolled Agent replied 7 months ago

No. You cannot claim anything.

You borrowed $50,000 and used all of it to purchase a house.

Under the IRS rules, ALL of the money you borrowed must have been repaid so it's not included as income.

The 1099-R you received shows the balance of what you owed on the $50,000 you borrowed.

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Tax Professional: Barbara, Enrolled Agent replied 7 months ago

If you didn't pay back the $10,000, your 1099-R would show the $50,000.

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