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posted Jun 1, 2019 1:41:46 AM

I did a deed in lieu in 2017 and it sold in 2018. Wells Fargo said they do not issue 1099-Cs on FHA loans. Does this mean I have nothing to report on my taxes?

I received a 1099-A in 2017 but did not report it as I was waiting on a 1099-C but since they are not issuing one I am wondering if I need to amend my 2017 taxes to include that 1099-A. The fair market value on the form was higher than the amount I owed on the loan so I think I shouldn't have owed taxes. 

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Level 2
Jun 1, 2019 1:41:47 AM

It depends.   Forgiveness of a non-recourse loan resulting from a foreclosure does not result in cancellation of debt income, but it may result in taxable income. A non-recourse loan is a loan for which the lender’s only remedy in case of default is to repossess the property being financed or used as collateral.That is, the lender cannot pursue you personally in case of default.  To figure your gain from foreclosure, if any, 

  1. Take the fair market value of the property foreclosed. (For non-recourse loans, enter the amount of the debt immediately prior to the foreclosure.)
  2. Then, subtract your adjusted basis in the property.(Usually your purchase price plus the cost of any major improvements) 
  3. If less than zero, your gain or loss is zero.  If this is a positive number, this is your gain from the foreclosure of your home.   

If you have owned and used the home as your principal residence for periods totaling at least two years during the five year period ending on the date of the foreclosure, you may exclude up to $250,000 (up to $500,000 for married couples filing a joint return) from income.  If you do not qualify for this exclusion, or your gain exceeds $250,000 ($500,000 for married couples filing a joint return), report the taxable amount on Schedule D of your return.

You may wish to report this transaction on your taxes, if only to show the exclusion from taxation, if the exclusion applies.  Here's how to Amend My Return in TurboTax.

1 Replies
Level 2
Jun 1, 2019 1:41:47 AM

It depends.   Forgiveness of a non-recourse loan resulting from a foreclosure does not result in cancellation of debt income, but it may result in taxable income. A non-recourse loan is a loan for which the lender’s only remedy in case of default is to repossess the property being financed or used as collateral.That is, the lender cannot pursue you personally in case of default.  To figure your gain from foreclosure, if any, 

  1. Take the fair market value of the property foreclosed. (For non-recourse loans, enter the amount of the debt immediately prior to the foreclosure.)
  2. Then, subtract your adjusted basis in the property.(Usually your purchase price plus the cost of any major improvements) 
  3. If less than zero, your gain or loss is zero.  If this is a positive number, this is your gain from the foreclosure of your home.   

If you have owned and used the home as your principal residence for periods totaling at least two years during the five year period ending on the date of the foreclosure, you may exclude up to $250,000 (up to $500,000 for married couples filing a joint return) from income.  If you do not qualify for this exclusion, or your gain exceeds $250,000 ($500,000 for married couples filing a joint return), report the taxable amount on Schedule D of your return.

You may wish to report this transaction on your taxes, if only to show the exclusion from taxation, if the exclusion applies.  Here's how to Amend My Return in TurboTax.