I received a 1099-s from sale of my LLC interest in a shopping center property, It included in Gross Proceeds the mortgage loan payoff. How do I handle the mortgage?

[john-hein]

I received a 1099-s form for the sale of my LLC interest in a shopping center rental property, It included in Gross Proceeds the mortgage loan payoff as well as the net cash I received. How do I treat the mortgage loan payoff amount when calculating the gain/loss? I actually incurred a loss after all expenses of the sale. I put in $255,000 and received $211,000 in the end but I did have ~$80,000 in accumulated depreciation, so I understand that this is recaptured, so net effect is about a $36,000 adjusted gain. So do I simply subtract the loan payoff amount on my tax form for cash proceeds?

[PatriciaV · Accepted solution]

No, the mortgage payoff is not included in the calculation of gain/loss on the sale. You may deduct mortgage interest that you paid on Schedule E. But the mortgage principal is not part of the sale.

[john-hein]

Thank you PatriciaV - so to be clear, when I fill in the "cash" sale amount on TurboTax, I don't use the 1099s figure anywhere, I simply subtract the mortgage amount paid off from the 1099s amount?  Is this correct?

[PatriciaV]

No, enter the full amount from Form 1099-S as the sales proceeds. You will not enter the mortgage payoff at all on your tax return.