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Want to know if I sold property at a loss { Short Sale} in…

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Want to know if I sold property at a loss { Short Sale} in 2017 and received a 1099 C will I owe any state or irs taxes

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Submitted: 1 month ago.Category: Tax
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Answered in 29 minutes by:
3/19/2018
Tax Professional: Lev, Tax Advisor replied 1 month ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 32,730
Experience: Taxes, Immigration, Labor Relations
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Can you verify - if that was your primary residence?

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Customer reply replied 1 month ago
it was
Tax Professional: Lev, Tax Advisor replied 1 month ago

The sale of personal residence is NOT reported on your tax return

as long as you do not have any taxable gain and that sale transaction was not reported on form 1099S.

Form 1099C report cancelled debt - we need to verify - if box 5 checked?

Check here if the debtor was personally liable for repayment of the debt - if yes - that amount of debt discharged is your taxable income - and should be reported on form 1040 line 21.

HOWEVER - you might be able to exclude that COD income - cancellation of debt income when you are insolvent.

When you prepare your Insolvency Worksheet - you need to determine if you were insolvent.
The worksheet may be found on page 8 in this publication -
http://www.irs.gov/pub/irs-pdf/p4681.pdf
You list all your assets and all liabilities - on the day before the loan was forgiven - so include that loan into the worksheet.
This worksheet is not sent with your tax return - just keep it for your record.
Do not send any supporting documents and do not send that Insolvency Worksheet - to the IRS - just keep for your record.
On that Insolvency Worksheet - you do not list your income - but you list the value of assets.

.

If you are insolvent - you will need to prepare form 982 with your tax return to claim an insolvency exemption

https://www.irs.gov/pub/irs-pdf/f982.pdf

- and in this case do NOT need to list that amount on line 21.

Let me know if you need any help with reporting.

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