1 / 8

Debt Cancellation and Mortgage Foreclosure/Abandonment

Module NJ 2.4. Debt Cancellation and Mortgage Foreclosure/Abandonment. Mortgage Forgiveness Debt Relief Act of 2007 1099-A 1099-C. Debt Cancellation and Mortgage Foreclosure. In scope ONLY if: Mortgage Mortgage is for TP main residence

tyanne
Download Presentation

Debt Cancellation and Mortgage Foreclosure/Abandonment

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Module NJ 2.4 Debt Cancellation and Mortgage Foreclosure/Abandonment Mortgage Forgiveness Debt Relief Act of 2007 1099-A 1099-C NJ Training TY 2008

  2. Debt Cancellation and Mortgage Foreclosure • In scope ONLY if: • Mortgage • Mortgage is for TP main residence • Must meet other requirements per Screening Sheet Pub 4731 • OUT OF SCOPE if amount of debt cancelled includes ANY interest reported on Form 1099-C NJ Training TY 2008

  3. Form 1099-C Cancellation of Debt Issued by Lender • This form is intended primarily for reporting cancelled or forgiven debt relating to mortgage on main residence • This cancellation of Debt is EXCLUDED from taxable income (Debt Relief Act of 2007) • Most cancellation of debt is treated as taxable income and included on line 21, Other Income • Mortgage debt cancellation is excluded from taxable income during 2007 thru 2012 per the Act noted above • Must complete & file Form 982 (simple, check few boxes) • See handout for boxes required to be completed or checked NJ Training TY 2008

  4. Form 1099-A Acquisition or Abandonment of Secured Property • 1099-A is issued by lender (Bank etc) when: • Residence is foreclosed by lender • Residence is given up (abandoned) by owner • In either case, it is treated as a Sale and requires a Schedule D • Sales price is lesser of Balance of Principal Outstanding or FMV of property as reported on Form 1099-A • Cost basis is provided by taxpayer NJ Training TY 2008

  5. Recourse vs Non-Recourse Debt • On a 1099-A, the lender will indicate in box 5 whether the tp was personally liable: • Yes-Recourse Debt • If TP is personally responsible for debt not satisfied by surrender of secured property • No-Non recourse • Total debt is totally satisfied by surrender of secured property and borrower has no additional liability NJ Training TY 2008

  6. Must Always File Schedule D • Use Schedule D Worksheet 2, Selling Your Home • Must ALWAYS file Schedule D in case of Foreclosure or Abandonment • No loss on sale of personal residence is allowed • Any gain of sale may be eligible for either $250,000 or $500,000 exclusion NJ Training TY 2008

  7. 1099-C vs 1099-A & 1099-C • A lender has option of providing a 1099-A and a 1099-C or issuing only a 1099-C if both debt cancellation and foreclosure or abandonment occur in the same calendar year • In the case of a 1099-C only being issued, it is used for both: • 1. Debt Cancellation Form 982 • 2. Schedule D for Disposition of property • In this case, the sales price is the lesser of Amount Of Debt Cancelled or FMV of property (Note Sales Price) NJ Training TY 2008

  8. Who To Contact • Cancellation of Debt is covered in Pub 4491-X • Contact Site Coordinator if any questions NJ Training TY 2008

More Related