Tax Issues with Dumping Bad Real Estate


This post is in: Real Estate
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5-3-11Every time I do a post about the Form 1099-A or Form 1099-C, I’m bound to get a bunch of questions.

You or someone you know might be trying to figure out what to do about a Form 1099 A or Form 1099 C right now. Here are some of the basics of what they are and when you’re going to see them.

The Form 1099-A is sent whenever property foreclosed on or abandoned. It is sent by the lender(s). You may actually receive more than one Form 1099-A, if you had more than one lender.

5-3-21The Form 1099-C is sent when a debt has been forgiven. This is the one that reports to the IRS that you’ve had cancellation of debt, and thus have some tax due.

The problem is that the lenders are not regularly giving out Form 1099-A and Form 1099-C when they should.

Our suggestion to our clients is to consider a Form 1099-A as cancelled debt if it is not possible for the lender to come after the former owner for shortfalls. This will be in states that have specific law that doesn’t allow the lenders to come after former owners of residential properties. (I’m not aware of any states that have similar laws for commercial properties, however.)

If you have debt cancellation, check to see if there is actually going to be tax due:

  • Do you have real estate investment property that means you can take a loss on Form 4797?
  • Do you meet any of the conditions of Form 982 that means the COD income will not be taxable?

We’re going to cover this in detail during our May Coaching Courses.

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One Comment

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