1099 Misc 2023
1099 Misc 2023 in this tax layer Pro training video we'll look at the forms 1099 a acquisition or abandonment of secured property and 1099 see cancellation of debt and we'll look at some examples in the tax layer pro. Web version the objectives of this training video are to distinguish between the forms 1099 a abandonment and 1099 see cancellation of debt will, determine if there's taxable income to report we'll talk about completing the form 982 reduction of tax attributes, due to discharge of indebtedness we'll talk about how to enter a few examples in the tax layer. Pro web software first some definitions and terms a foreclosure is when a borrower in. Default is deprived of his or her interest or rights in a mortgaged or secured property this is, often a lengthy and expensive legal process and the laws and procedures can vary from state to state the lender regains possession and control over the secured property, or again a.
Repossession for tax purposes a foreclosure is treated as a sale of the property so the borrower will have a realized gain or loss abandonment occurs when a borrower voluntarily and permanently gives up, possession and use of the property with the intention of ending his or her ownership there's no direct conveyance to the lender an. Abandonment is also considered to be a sale or exchange of property for income tax purposes an abandonment is most often, reported on form 1099 a voluntary conveyance voluntary surrender of property to a, lender in exchange for full or partial discharge of the debt it secures his considered voluntary conveyance it's not considered to be an abandonment it's. Also considered to be a sale or exchange of property for income tax purposes it's an alternative to, the foreclosure process as tax preparers our main function is to help our clients understand what's going on on, the tax return what are the documents mean that they've received in the, mail on the other side of the desk the clients perspective on foreclosures we probably heard phrases like this the bank just. Took my house I don't understand the whole paperwork process I just don't want to deal with it they just kicked us out and again it's our job, as prepares to help. The client understand what's going on on the tax return and how to report a 1099 a or 1099 see that the client may have received in the mail form, 1099 a box one indicates the date of sale in other words the date of, the lenders acquisition or the knowledge of abandonment that's why we have sale in quotations box two indicates the amount owed or the balance, of principal outstanding box four indicates the fair market value on the date of the quote sale this is the gross foreclosure bid price box five indicates if this was a, recourse loan if this box is checked the borrower was personally liable for repayment of the debt, box six gives a description of the property now we talked about recourse debt on that form just, a moment ago so what's the difference between recourse and non recourse debt well recourse debt the borrower is. Personally liable for repayment of the outstanding debt after the foreclosure sale proceeds have been applied the lender can, pursue a deficiency judgment and recourse debt cancellation may result in taxable income to the borrower non-recourse debt. The borrower has no personal liability after a foreclosure in no taxable income results from the cancellation of debt now going back to our form 1099 a the, difference between recourse and non recourse debt recourse, debt box five is checked the sale price indicated on this form is the lesser of Box two or box four again this, is if the recourse debt box is checked the sale price is the lesser of the balance of the principal. Outstanding or the fair market value of the property in non-recourse debt box five is blank so. The sale price is box two the balance of principal outstanding there's some additional questions that we need to ask the taxpayer if he or she receives one of these documents was the, property for personal use was it business was it rental property what was the. Purchase date was the property a principal residence was the property of vacation home what's the cost basis of.
The property was there any depreciation ever taken, on the property were there any improvements made and where the property taxes paid and are they current now. Let's take a look at our first example our taxpayer Steven Cabella receives a 1099 a on his principal residence now the sale price is $100,000 the fair market value of the property.
Because this is a recourse debt he's personally liable for repayment of the debt so mr. Coble is on the, hook for any additional amounts owed after the foreclosure sale the one hundred and twenty. Thousand dollars in box two minus the hundred thousand dollars in box four leaves a twenty, thousand dollar balance this may generate a 1099 see in the future now we've entered mr. Cabela's personal information into the pro web software and we're here at the income, menu and from the clients income screen we'll select begin capital gain and losses Schedule D will select capital gains and, loss I demand we'll enter the information on the capital gains transaction screen for our example. The date the house was originally purchased was March 1st 2015, and the quote sale date from the 1099 a is listed as oh seven eighteen twenty eighteen the original cost basis of the residence was $165,000 the sale price of, a hundred thousand is entered from the 1099 a and we also want to indicate that the client did not receive a form 1099 B, for this transaction next we're going to enter a positive amount in the adjustment screen to offset the sixty, five thousand dollar loss from the. Quote sale of the personal residence so here we'll enter a positive sixty five thousand dollars losses are disallowed as tax deductions on personal use property next we need.
To select an adjustment code that will appear in. Column F of the form 8949 and we'll choose el non-deductible los other than a wash sale on this screen we'll click continue and on the next screen will click continue again now, we can look at part 2 of the form. 8949 after we've entered that 1099 a information and recall the form 8949 carries to the Schedule D we see that box F is checked long-term transactions not reported. On a form 1099 B and the $65,000 quote loss is disallowed well what. If the original cost of the personal residence had been 75,000 instead of 165 thousand at first appearance looks like there's a gain of. 25 thousand dollars on the quote sale of the residence the hundred thousand dollars the sale..