Where Can I Get Form 1099-A, Receipt for the Transfer or Disposition of Security Interests?
When a property is transferred due to foreclosure, the lender must submit Federal Tax Form 1099-A: Acquisition or Abandonment of Secured Property.
Form 1099-A – Acquisition or Abandonment
Contents
Lenders are required to submit this form with the Internal Revenue Service (IRS) in the year following the calendar year in which the taxpayer acquires an interest in the property or first knows or has cause to know that the property has been abandoned.
The date of the transfer and the property’s fair market value must be disclosed by the issuer (FMV).
NOTABLE CONCLUSIONS
- The IRS must be informed of any and all real estate transactions.
- Property that has been foreclosed upon or left abandoned will normally need a Form 1099-A to be filed as part of the required documentation.
- Form 1099-A must be submitted by lenders to the Internal Revenue Service and a copy must be provided to the borrower.
- Schedule D of a tax return is where taxpayers include details from Form 1099-A.
- Foreclosure capital gains are treated the same by the Internal Revenue Service as regular sale profits.
Who Has to Submit a 1099-A?
When a property is sold or transferred as a result of foreclosure, financial institutions (such as banks) must file IRS Form 1099-A to inform the IRS.
As mentioned above, the form must be submitted by lenders the year after the calendar year in which an interest in the property is acquired. A lender may use this form if they have reason to think a property has been abandoned.
The 1099-A forms are duplicated three times. The lender delivers you Copy B and keeps Copy C, while Copy A is filed with the Internal Revenue Service.
Get in touch with your financial institution if you don’t get a 1099-A even if you feel you are entitled to one.
Save it for your records but do not include it in your tax return.
An overview of 1099-A forms follows. Information regarding the lender and the borrower, such as their names, residences, tax identification numbers (TINs), and account numbers, are included on the left side of the form. There are six sections on the form’s right side.
Indicate the date your lender took ownership of the property or found out it had been abandoned (Box 1). Date of Lender’s Acquisition or Date of Lender’s Knowledge that Property Was Abandoned is Listed in Box 1.
The amount of principle still due is shown in Box 2. Your loan sum (principal only) as of the date of acquisition by the lender or the date the lender became aware that the property had been abandoned is shown in Box 2.
Reserved for Box 3. Most people just leave this space empty.
FMV (Fair Market Value) is shown in Box 4. The current market price of the property is shown in Box 4.
You may be eligible for cancellation of debt income if the amount in Box 4 is less than the amount in Box 2 and your debt is canceled. If this is the case, you should also get a 1099-C tax form.
If the borrower was individually responsible for making the payments, mark Box 5. The date of creation or, if the debt has been updated, the date of the most recent adjustment is shown in Box 5.
Property description may be found in Box 6. The location’s address may be found in Box 6. If it doesn’t tell the lender enough, they’ll want to know the property’s section, lot, and block.
Gains from the sale or exchange of a primary home are exempt from taxation up to $250,000 ($500,000 for married couples filing jointly).
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Form 1099-A Instructions
Your lender will send you a copy of Form 1099-A for your records if you lost a house or other real estate property to foreclosure.
Several 1099-A forms may be issued if more than one mortgage or loan was taken out on the same property. By January 31st of each year at the latest.
Form 1099-A will provide information you’ll need to record the foreclosure on your taxes. Schedule D of Form 1040 is where you list your capital gains and losses, therefore that’s where you’ll want to submit your data.
Gain or loss is determined by deducting the home’s tax basis from its current market value. The tax basis is the purchase price less any renovations.
In this case, the outstanding mortgage amount at the time of foreclosure will be used instead of the fair market value since you will not be held responsible for any remaining debt on the loan.