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For form 1099-A what happens when the amount of the loan is…

For form 1099-A what happens...
For form 1099-A what happens when the amount of the loan is less than the FMV of the property?
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11/8/2017
Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
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Hello, My name is ***** ***** I will be able to assist you today.

You'll need the selling date and the selling price of the foreclosed property to properly report its "sale" to the IRS, and you'll find this information on Form 1099-A.

__

For the sales price, you'll use either the fair market value of the property or the outstanding loan balance at the time of the foreclosure. The outstanding loan balance is found in Box 2, and the property's fair market value is found in Box 4.

__

Assuming the foreclosed property was your personal residence, you must prepare and file Schedule D with your tax return.

Use the date of the foreclosure in Box 1 of the 1099-A as your date of sale, then enter the selling price. This will be either the amount in Box 2 or the amount in Box 4. Which box you'll use will depend on the lending laws of the state in which the property was located

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Use Form 4797 if the foreclosed property was a rental or an investment.

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Here is a link to tax topic number 432 - form 1099A at IRS.Gov

https://www.irs.gov/taxtopics/tc400/tc432

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Q: For form 1099-A what happens when the amount of the loan is less than the FMV of the property.

A: To report the sale price of the home you have to refer to your state laws to decide whether you need to use the fair market value of the outstanding loan amount as the sale price.

For tax purposes you either need to complete Schedule D of the 1040 to report the "sale" or if the property was an investment property then you report the sale on IRS Form 4794

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Customer reply replied 8 months ago
Hi,I am confused about using either the FMV or the Loan Balance as the sales price. Property was located in NJ if that helps and the box personally liable was checked off. The loan balance was 335,568 and the FMV was 336,000.

Is box 5 completed?

Box 5 to figure the sales price — . If the box is marked “Yes,” you have a recourse loan. If it’s marked “No,” you have a nonrecourse loan.

  • If you have a recourse loan, your sales price will be the lesser of these:
    • Outstanding debt immediately before the foreclosure — 1099-A, Box 2
    • Fair market value (FMV) of the foreclosed property — Box 4
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Generally, New Jersey has been known as a recourse state which is most likely why liable was checked off.

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Chad EA, CDFA®, CFP®
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