I purchased a home for 400,000 (mortgage bal is 305,000). I rented the home out for 4 years at a loss when my husband lost his job. We did benefit from the depreciation deduction on our taxes to a small degree over the years. The loan is a recourse loan in Florida. We sold the home on a short sale for 165,000 and received a 1099C for 156,000.
Our total assets total $341,000. This included the fair market value (55,000) of an additional rental property Condominium which is collateralized by a non recourse debt for 148,000 and a recourse debt for 13,000. Total assets = $341,000. Total debts including recourse and non recourse loans, fees and penalties on short sale property total $526,000. My accountant is telling me that because the condo includes a non recourse debt in the amount of $148,00 I will have a significant amount of income remaining from the 1099C. This does not make sense to me as the 1099C has resulted from the sale of the house not the condo. I'm not sure if this accountant has done an insolvency claim before. My adjusted gross income last year totaled $24,000 of disability income. I will not be able to pay my taxes if I have income from the 1099C. Please .... if anyone can advise I would be grateful.
1 Answer from Attorneys
Your primary issue derives from the 1099C for 156,000 resulting from a short sale.
This is an issue which should be resolved as part of a short sale. Based on the
information provided, your accountant appears informed regarding your tax liability.
A detailed analysis would be required to advise regarding insolvency claim options.
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