Posted by Jeff M on March 13, 2002 at 08:52:58:
Ray or John:
If, in fact, the debtor was insolvent, and can avoid the “forgiveness of debt income”, does the creditor/bank still get to deduct the amount as an expense? Thanks.
Abandoned Home - 1099 - Posted by Karl (Oh)
Posted by Karl (Oh) on March 08, 2002 at 14:09:52:
I sold a little 12X60 to a woman who lost her new doublewide to the bank last year. She owed $35k when they repossessed the home. The bank estimated the value of the home to be $11k, and they?re showing the difference as taxable income. The woman got an Abandoned Home/Bad Debt 1099 in the amount of $24k. Is that how it works when someone loses their home?
The bank actually re-sold the home to another investor for $20k (not a very shrewd investor, I might add). So the bank actually took a $15k loss.
Can this woman get a corrected 1099? Or dispute the income all together? This woman was going to use her big tax return to pay off her trailer loan with me. I’d hate to see the IRS keep all that money instead.
Karl Kleiner
Re: Abandoned Home - 1099 - Posted by ray@lcorn
Posted by ray@lcorn on March 10, 2002 at 21:07:33:
Karl,
Pay particular atention to John’s comment about the debtor being insolvent. Forgiveness of debt income is very easy to avoid. The very facts that the home went to foreclosure, that the value was much less than the debt, and the bank in fact sold it at a loss, are three very big factors that go to prove the debtor’s insolvency prior to foreclosure. The definition of insolvency for tax purposes is not very strict. I’m on the road tonight and don’t have the exact verbiage, but it is easily found. And if she happened to have filed bankruptcy no further proof is needed.
ray
Re: Abandoned Home - 1099 - Posted by JHyre in Ohio
Posted by JHyre in Ohio on March 09, 2002 at 11:56:23:
The 1099 amount should equal debt forgiven less sales proceeds. If she was bankrupt, or even insolvent, she should be able to exclude debt forgiveness income altogether.
John Hyre