AboutJohn Stancil, CPA Expertise I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I teach tax and accounting at a small church-related college. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a part time tax practice for over 30 years. I am a member of the AICPA, National Association of Tax Professionals, and the Institute of Management Accountants.
Visit my website at www.johnstancilcpa.com.
Also visit my blog, www.thetaxdocspot.com.
Experience I hold a doctorate in Accounting, and four professional certifications: CPA, CMA, CFM, and CIA. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I write a monthly tax column for the local newspaper. I have prepared taxes for over 30 years.
Education/Credentials DBA University of Memphis
MBA University of Georgia
BS in Accounting Mars Hill College
Question I am trying to help out a personal friend. Here are the facts. He had a first trust deed secured by the property (personal residence), and a second mortgage loan. The property was foreclosed by the first lien holder on 05-2008. The second mortgage company sent him a 1099-A form that reads as follows: box 2 - balance of principal outstanding $55,498, box 4 - fair market value is zero, box 5 the "no" box is checked relative to "was the borrower personally liable for repayment of the debt?".
To this date he never received form 1099-A or 1099-C for his first deed mortgage loan. Is he suppose to receive one? If his balance is forgiven completely on the first, is there a sale to be reported on the tax return and what would be the number to use as a sale price - is it the the fair market value? How is his 1099-A from his second being reported on the tax return?
Any help at all is greatly appreciated. Thank you.
Answer Mario,
Thanks for your question.
If he owed more on the house than its fair market value, he owes taxes on the difference. A 1099 should be issued. He owes taxes on the amount of forgiveness of the second mortgage.
If the house was his personal residence he cannot deduct the loss on the sale. The gain is taxable unless he has owned and lived in the house for 24 of the past 60 months (up to $250,000 or $500,000 if filing joint). The sale price is the amount of canceled debt.
