Form 1099-A From Dumping Bad Real Estate

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form 1099aThe real estate downturn is still affecting taxpayers. If you lose or turn back a property, you’ll get a Form 1099-A.  This may be all you get if the fair market value (FMV) covers the debt you owe, if you clearly qualify for a tax exemption (bankruptcy or principal residence) or if the lender just decides to not give any more documentation.

If you’ve gotten a Form 1099-A and wondering what happened to a Form 1099-C, you can try to get more information from the lender. But usually the lenders have way better thing to do (they think) then talk to you.

In fact, that’s what happened to one of our USTaxAid community members. Here’s their question:

“I had an FHA mortgage that sold at auction back to lender for full balance of loan. It sold on February 5 2013. I got a 1099a with fmv being 12k more then what I owed. I called the mortgage company and asked if I would get a 1099c and they said no because my balance is 0 and no debt was forgiven. FHA paid the loan. Will I get a 1099 from FHA or HUD?”

The next form, Form 1099-C would indicate that there was cancellation of debt. In your case, however, the property sold for the amount for the debt. So the lender didn’t need to forgive any debt. They got paid back.

If the property was a principal residence and you don’t receive any other documentation, you have nothing to report.

If it was an investment property, you still need to report the disposal of the property. The sales price will be the amount of debt at the time of loss subtract cost of sales and basis, add back in accumulated depreciation and you have your gain or loss on the property.

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