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I lost an investment property in a short sale. The lender…

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I lost an investment...

I lost an investment property in a short sale. The lender send me 1099-c with $81,388.81 on line 2 and $110,000.00 on line 7.Box in line 6 is ticked.what are the tax consequences.

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

FMV of my assets exceed the liabilities

Accountant's Assistant: Is there anything else important you think the Accountant should know?

In 2015 i lost my other investment property to foreclosure. i reported a loss of $92k. At the time my total liabilities were more than my assets. the HRB tax program asked for this number I don't understand the relevance no more relevant info.

Submitted: 19 days ago.Category: Tax
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Answered in 17 minutes by:
4/2/2018
Tax Professional: Lev, Tax Advisor replied 19 days ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 32,685
Experience: Taxes, Immigration, Labor Relations
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You likely meant box 5 checked - Check here if the debtor was personally liable for repayment of the debt

That actually means $81,388.81 is discharged - and that amount is reported as your COD income - cancellation of debt income.

That amount will be taxable and reported on your tax return unless you qualify for exclusion.

If you do qualify - that exclusion is reported on form 982 attached to your tax return.

However if the debt is excluded - you will need to reduce your basis by that excluded amount.

You will report that transaction as the sale - and deemed sale price is the FMV=$110,000

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Customer reply replied 19 days ago
i already reported the short sale gain or loss following the HRB instructions. this is an entirely a separate issue correct?
Customer reply replied 19 days ago
bed time have to try some other time
Tax Professional: Lev, Tax Advisor replied 19 days ago

It is separate issue - but not entirely...

If the debt was forgiven as a condition of short sale - while the property was a collateral - you will need to REDUCE your basis by the amount of debt forgiven.

If however - the property was sold - and the debt remained - there is no collateral - in this case the debt becomes unsecured - and will be entirely separate debt.

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Tax Professional: Lev, Tax Advisor replied 17 days ago

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