I received a 1099-a on a foreclosed property in April of 2008 in CA. Why not a 1099-c?
I received a 1099-a on a foreclosed home. It states I am not liable for the loan according to the 1099-a. It shows the Loan value and FMV and FMV is much lower than the loan. Do I report that difference as income? Does the mortgage debt forgiveness act protect me from being taxed that amount? Countrywide tells me that there is no recourse on my loan therefor I get only a 1099-a. I keep finding articles about 1099-c being given to people to take advantage of the mortgage debt forgiveness act but nothing on a 1099-a. Am I supposed to report the difference between the loan value and Fair Market Value and be taxed on that even though the mortgage debt forgiveness act is in affect? Do I still fill out a 982?
You won’t need a 982 but you will need a Schedule D to report the “sale” of the property. As this is a non-recourse loan, it is treated as if you sold the home for the balance of the loan. If the loan value is higher than your basis, you may have a taxable gain. If it is less, and you lived in the property, you have a non-deductible loss.
One thing to note is that will the mortgage debt forgiveness on the federal return is up to $2 million, I believe that it is only $800,000 for the California return. This probably won’t effect you but it may.
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