Mortgage Debt Forgiveness Act/2013 Taxes

[she2003]

What is the name of your state (only U.S. law)? CA

Bank foreclosed primary residence on 3/26/13. I received 1099-A, but did not receive 1099-C. I learned that 1099-A does not need to be filed with my 2013 tax return and that I might receive 1099-C in the future. My 2013 tax return was completed/transmitted and I made no indication of the foreclosure & 1099-A. A friend told me that I should have included the sale of the home in income anyway and flag it as foreclosure. I know that the house sold at auction, but the bank never sent me formal details on how much it was sold for. Now I am thinking that I may need to amend my tax return & update the income section. Any feedback is appreciated. Thanks

 

[FlyingRon]

If your 1099-A reflects a capital gain that is not in the excludable range (unlikely), you report it on your taxes, otherwise you don't. The only price that matters to YOU is what is reflected on the 1099-A. The bank more than likely ended up purchasing the home at the foreclosure sale (which is what was reflected on the 1099), so what they eventually sell it for is immaterial to you.

Until the bank declares the loan forgiven and issues a 1099-C you have no tax implications. When they do, it will apply to THAT tax year, not the year of the foreclosure. Was this a purchase money loan that would qualify as non-recourse?

 

[she2003]

Thank you very much Ron.

This was originally a purchase money loan that would qualify as non-recourse. However, I did refinance about a year after the purchase to lower the interest rate. The 2013 foreclosure was non-judicial.

The 1099-A has $231,985.78 in box 2 and $244,180.77 in box 4. I found on the Internet that the house sold for $219,000 and was sold back to the bank. I am trying to understand what the financial impact will be to me in the future. My assumption is that I could be taxed on the difference between box A and the sale price, which would be $12,985.00. Then if the mortgage debt relief act is extended through 2014, I could be forgiven for that amount.

This is just my logic, which may be completely incorrect from a legal perspective. I am trying to figure out the worst-case scenario.

Thank you