I settled a debt of $49,000 in 2015 by taking a run down house. I sold the house in 2016 for $46,500. How do I handle this on Turbo Tax? My attorney sent me a 1099-S.

[MiriamF · Accepted solution]

Any time you barter with someone, accepting property in exchange for goods or services, the value of the property is equal to the value of the item or service for which it is exchanged. If you accepted the house in exchange for a debt of $49,000, the basis of the house is $49,000. If the house was to pay a business debt, then it should have been reported on your 2015 income tax return. If it was to repay a loan, then the exchange was not reportable.

If you invested nothing in the house, and sold it for $46,500, then you would have a loss of $2500 increased by any expenses of sale.

Publication 525 explains more about IRS rules regarding bartering.

[jahollon1]

Where do I enter this on Turbo Tax?

[MiriamF]

Type "form 1099-S" in the Search box, then select Jump to Form 1099-S. This will take you to the page where you begin entering the sale of investment property on Schedule D. Select "No" to whether you have a 1099-B, then choose from among the types of investments sold. If you didn't live in the house, it would be "Everything else."  Continue answering the questions. When you are done, preview the Schedule D to make sure that the sale is reporting correctly.