Insolvent?1099?

General Real Estate Investing
1

Hi.

I have posted this question before but now have more info. I have a HO who we are in negotiations with her bank. If they waive their right to a deficiency judgement they will probably do the 1099 if it doesnt get lost in paperwork. yadayadayada…

So my accountant says that he can fill out her tax return info and declare her insolvent (more than likely is what he said). So then she wouldnt have to pay those taxes? I believe him, he’s great i just wanted to see if anyone has had success with this?

2

uhm…an accountant can’t “declare” anyone insolvent. bankruptcy is determined by a judge.

yes, she will get a 1099. and yes, the IRS will expect the sale to show up on her tax return.

if it’s her residence, no big deal. if it’s an investment and there’s any gain, she will have to pay tax.

3

Okay so he cant fill it out and show that she was insolvent? Cause he said there was a line that he filled out?? The foreclosure is on two of her rentals? She owes like 99,000 or a little more now. And i offered 68,000???
IF they accept how much will that hurt her, becuase she didnt want to accept the offer until we found out about the taxes and so once my accnt told her that then she was okay with the deal, now i’m worried we told her wrong??

4

forgiven debt is income, plain and simple. she may or may not have a gain or loss on the disposition, depending on her cost basis, and other factors.

I’ve never seen a box on a 1040 that says “check here if you’re insolvent”. But, man, I’d like to know what form it’s on. That would solve ALL my problems!

5

McWagner or anyone who can help

Alright… I need to know this asap, and i called my accountant and he is out for the day. They turned down my offer of 68 and said they could do it for 75. That still has me making enough to satisfy me. I have to let them know first thing Tues. morning (tomorrow) That still has me making enough to satisfy me. But here is the thing. Like I said before Mary didnt want to do the deal if she had a lot of tax implications. So I went to my accountant and explained this. He told me that on her return she would probably be insolvent. And not have to pay taxes from the 1099 issued. So I went and told Mary this and she was fine with doing the deal. Now I am thinking this is all wrong. Can you help, do i need to back out? How much would she have to pay, could i give her the money to pay them? She originally owed like 89,000 when she first got served paperwork, now she’s probably pushing 100,000, my final accepted offer will be 75,000. What is the tax implication.

Thanks in advance.

6

forgiven debt is income, plain and simple. she may or may not have a gain or loss on the disposition, depending on her cost basis, and other factors.