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?
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.
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?
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.
What about paying closing costs as a seller? I will give a credit to my buyer. Does that mean the gross amount that I will report has the added closing costs as an earning? Also, to confirm I understood correctly, the 1099 S gross earnings already doesnt count money that went to the pay off of the mortgage loan after the sale? Thanks in advance!