We received a 1099-C in 2017 for cancellation of debt for a Rental Property that was sold in a Short Sale two years ago. How do I enter the debt amount for this on TT?

I read the information on taxes and short sales and it appears we need to enter the debt forgiveness amount as income since the property was a rental and not our main home. To do this on Turbo Tax, we select second home in that Miscellaneous Income thread for 1099-C, since rental does not allow us to enter the debt amount? True?

However, the property sold in the short sale was owned only by my wife who is retired and whose only personal income last year was from social security. (She purchased it before we were married.) Would it be better to file individually rather than jointly?

Answer

Please follow the instructions in the FAQ below:

If your debt is canceled or forgiven, you'll receive Form 1099-C (Cancellation of Debt).

For tax year 2018, the exclusion for canceled debt is currently unavailable. At this time we don't know when, or if, Congress will approve it for tax year 2018. If the exclusion is approved after your file your 2018 return, you can file an amendment to claim it. Alternatively, you can postpone filing your return until Congress definitively approves or denies the canceled debt exclusion.

Note: If you received a 1099-C for your main home and another 1099-C for something else (credit card, car loan, second mortgage, etc.) you won't be able to use TurboTax, as the interview doesn't support this.

To enter your 1099-C:

  1. Open (continue) your return, if it's not already open.
  2. From the upper right menu, select and search for 1099-C or 1099C (lower-case also works).
  3. Select the Jump to link at the top of the search results.
    • If using Free Edition or TurboTax Live Basic, follow the prompts to upgrade to Deluxe.
  4. Select the type of cancelled debt (main home or other) and then select Continue.
  5. Follow the onscreen instructions to enter information from your 1099-C.

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