Call Us: 918-236-8385 or Toll Free: 866-647-1770
Local 918-236-8385
Toll Free: 866-647-1770
When Bad Things Happen to Good People ...

Bankruptcy May Be Your Option

Gain or Loss from Foreclosure - IRS Form 1099-A and 1099-C

Not only can a borrower be forced to recognize taxable income for cancellation or discharge of indebtedness such as on a foreclosure, the borrower can have a taxable gain or loss from the foreclosure. A borrower is required under the Internal Revenue Code to report the gain or loss from a foreclosure or repossession in the same way as gain or loss from a sale. The gain or loss is the difference between the amount realized and the borrower's adjusted basis in the property.

A lender who acquires an interest in a borrower's property in a foreclosure or repossession is required to send the borrower an IRS form 1099-A for acquisition or abandonment of secured property. If the lender also cancels part or all of the borrower's debt, the lender must send the borrower a 1099-C when the amount canceled is in excess of $600.00. Form 1099-A or 1099-C should be mailed to the borrower by January 31st of the year following the foreclosure or repossession.

If a borrower receives IRS form 1099-A that indicates a gain, a borrower should document their purchase price and the cost of all improvements in the property in order to eliminate or reduce the taxable gain. The normal rules with regard to the exclusion of gain on the sale of a residence apply, i.e., $500,000.00 ($250,000.00 if filing separate) may be excludable from income. If a borrower receives a 1099-C, the borrower should file IRS Form 982 - Reduction of Tax Attributes Due to Discharge of Indebtedness. If Form 1099-A indicates a gain and the property is the borrower's residence, the borrower should also file Form 982 to exclude the gain from income.

No Comments

Leave a comment
Comment Information

Initial Consultation

Bold labels are required.

Contact Information

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.


Privacy Policy