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Posted by way222 on April 4, 2007, 2:39 pm
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> Would like to ask how to establish a sales price (for the
> purpose of determining gain/loss) on a foreclosed property?
> 1099-C lists amount of debt cancelled as $50,000.00 and Fair
> Market Value as $200,000.00. Thanks.
?
> Anyone? Help please.
It depends on whether the loan is a recourse loan or not.
They are treated slightly differently. See pub 544 "Sales
and Other Dispositions of Assets", there is whole section on
foreclosures.
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Posted by Bill Brown on April 5, 2007, 2:27 am
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> Would like to ask how to establish a sales price (for the
> purpose of determining gain/loss) on a foreclosed property?
> 1099-C lists amount of debt cancelled as $50,000.00 and Fair
> Market Value as $200,000.00. Thanks.
Sales proceeds (cash received + debt forgiven) - basis
(acquistion costs + capital improvements - depreciation
allowed or allowable) = Gain or Loss
Losses on personal use property (such as a personal
residence) are not deductible.
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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Posted by Shyster1040 on April 9, 2007, 3:48 am
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> Would like to ask how to establish a sales price (for the
> purpose of determining gain/loss) on a foreclosed property?
> 1099-C lists amount of debt cancelled as $50,000.00 and Fair
> Market Value as $200,000.00. Thanks.
Sales proceeds (cash received + debt forgiven) - basis
(acquistion costs + capital improvements - depreciation
allowed or allowable) = Gain or Loss
Losses on personal use property (such as a personal
residence) are not deductible.
*************************
In this case, so long as the mortgage, or other debt,
secured by the house was recourse (i.e., it was a personal
liability of the owner), the amount of debt forgiven by the
creditor is not included in the amount realized (i.e., the
sales price). Instead, that amount will be treated
separately and, to the extent not excluded under Code Sec.
108, will constitute ordinary income. See Treas. Reg.
1.1001-2.
The reason for this is that the owner of the house is
treated as paying off part of the debt with the FMV of the
house; however, because the debt is a personal liability,
the transfer of the house does not extinguish the remainder
of the debt, which continues to be a personal liability of
the owner. If the creditor then forgives or discharges the
remainder of the debt, that is a separate transaction in
which the debtor/owner will recognize income from the
cancellation of indebtedness unless that amount is excluded
under Code Sec. 108.
Thus, the amount realized (i.e., sales price) on disposition
of the house in foreclosure is the fair market value of the
house, plus any cash and the FMV of any property received by
the owner.
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>
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