AboutMike Wellman Expertise I was a former Manager with Price Waterhouse, now PricewaterhouseCoopers, the largest accounting firm in the world. I have had clients in almost every industry and of every size.
I will only answer questions dealing with IRS problems such as delinquent tax returns, Offers in Compromise (Tax Settlement), IRS collection matters including installment agreements, liens, levies, seizures, audits, appeals, innocent spouse claims and injured spouse claims. All other will be referred to the question pool.
Experience Over 25 years experience in taxation specializing in IRS collections, examinations and appeals.
Publications New York Times, Wall Street Journal, Your Money.
Education/Credentials BBA, Baylor University.
Awards and Honors IRSOS.com won the Knowledgeweb award for educational excellence for content.
Expert: Mike Wellman Date: 1/30/2008 Subject: 1099-A Deed in lieu of foreclosure
Question I have a big problem. I did a deed in lieu of foreclosure with a lender in CA that had both the first and second loan with them. I bought another house a month later in OK, and have not done a bankruptcy. The house in CA sold for almost 200k less than what I owed on it ($465k vs $270k). I just received two 1099-a forms on the same property with different amounts. The first one says principal outstanding $500.00, with a FMV of $365,000. The second 1099a says principal outstanding $334,796, and a FMV of $280,000. I am confused as to why I have two of these, and hoping that I don't have to report the difference of $500 and $365,000 dollars as income? Maybe I need to go bankrupt?
Answer I can't explain why you got two 1099's except that it makes sense that one was for the first and the other for the second.
Debt cancelation is not taxable incident to bankruptcy or if you are technically insolvent. Technically insolvent means that, at the time of the debt cancellation, your total debts exceeded your total assets. If that is the case, you can exclude the gain on debt cancelation.
I should mention that recently passed legislation specifically excludes debt canceled on a foreclosed mortgage. So if the foreclosure happened recently, you will be able to exclude the gain - even if you were not insolvent.
