Form 1099A Abandonment Foreclosure Do I really have to pay taxes on the diff between the FMV & my mortgage?
Saturday, August 7th, 2010 at 7:11 am
The FMV of the house is listed as ,000 and the loan is 7,000. The house was in my name. I filed bankruptcy and did not reaffirm the property. It is business debt. Do I have to pay taxes as if I had 9,000 (7K-K) in income? I don’t make enough to pay this much in taxes! I am so scared. Please help!
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Dear Terri: The 1099-A is just the first step in a long process.
You do not do anything until you get a 1099-C. (cnx of debt) Then it depends on your state if you live in a recourse or non-recourse state. This determines the taxability of the cnx of debt. Since a lot of people are having issues with debt it would be wise to consult with a person familiar with the laws of your state and the Federal reporting steps.
Your home is always personal and not business debt.
There are several ways to exclude cnx of debt on your main home from income.
This advice was prepared based on our understanding of the tax law in effect at the time it was written as it applies to the facts that you provide. Click on my profile to read more. Errol Quinn Enrolled Agent
For the Federal this is not included in income. You still have to report it though. For the state it depends on what state you live in. Friends in California have a huge tax bill right now because the state treats it as income and taxes it.
You report the sale of a home with the 1099A. When you receive the 1099C you will claim the difference as income. It could come in a different tax year. It may or may not be taxable depending on other circumstances. You say it is business debt. Was this rental property? This will be a business loss. You really need to see a professional who is trained in foreclosures.
this is not notifiying you that you have a cancellation of debt, it is notifying you that the asset was assumed by the person or company named
there may not be a cancellation of debt, wait for the 1099 C