1099-A, Acquisition or Abandonment of Secured Property

[Munsen]

I received a 1099-A, Acquisition or Abandonment of Secured Property. It only states the date acquired, principal outstanding balance and the fair market value. I was personally liable for repayment of debt, but they took the equipment to auction and used that money to pay off the loan.  Am I required to file this and if so, is it simple enough to enter on my own and what do I file it under?

[Cindy4]

Yes, you are required to use the information on the Form 1099-A to report the transaction on your tax return.

The Form 1099-A itself is an informational document filed by the lender with the IRS. It's an alert to both you and the IRS that a taxable event may have occurred. You don't file the 1099-A form itself, but you must use the information on it to calculate and report any gain or loss on your return.

To determine your gain or loss, you will need to calculate the "amount realized" and compare it to your "adjusted basis" in the equipment.

Amount Realized: This is the value the lender used to satisfy the debt. Since you were personally liable for the debt, the IRS considers your amount realized to be the Fair Market Value (FMV) of the equipment (as stated in Box 4 on your 1099-A).

Adjusted Basis: This is generally the original purchase price of the equipment, plus any major improvements, minus any depreciation you have taken for business use.

If the lender canceled more than $600 of debt, they are required to issue you a separate Form 1099-C, Cancellation of Debt.  If you receive both a 1099-A and a 1099-C, the transaction is handled differently. The foreclosure/repossession is a "sale" (1099-A), and the canceled debt is "income" (1099-C), which is generally taxable unless you qualify for an exclusion (e.g., insolvency).  If you only received a 1099-A, it's likely the lender considered the loan satisfied by the equipment's value and did not cancel any debt.

To enter in TurboTax, type 1099-A in the search box once you are logged into your tax return.  This will take you to the correct part of the program.

Follow the Interview: TurboTax will guide you through a series of questions. You'll need to answer them to correctly calculate your gain or loss.   You'll indicate that the event was an "abandonment" or "repossession" and that you received a Form 1099-A.  Enter the details of the 1099-A exactly as listed on the form.

Hope this helps!

Cindy