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Old 02-16-2010, 05:56 PM
 
9 posts, read 71,365 times
Reputation: 13

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We lost our condo to a short sale, in CA.
Bank issued a 1099-C. (cancellation of debt form)
IRS confirmed that a non-recourse loan (loan was soley for the purchase of the home) DOES NOT result in Cancellation of Debt Income.

NO 1099-C should have even been sent to me or the IRS.

Bank refuses to correct it or remove it.

IRS said that I HAVE TO FILE IT if I got it, even if it is wrong.

NOW WHAT????
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Old 02-16-2010, 06:02 PM
 
11,715 posts, read 40,451,929 times
Reputation: 7586
They are correct in sending you the 1099-C. When you complete your tax return, if the terms of your specific situation qualify you, that 1099-C will not be considered taxable income to you.
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Old 02-16-2010, 06:27 PM
 
9 posts, read 71,365 times
Reputation: 13
Quote:
Originally Posted by EscapeCalifornia View Post
They are correct in sending you the 1099-C. When you complete your tax return, if the terms of your specific situation qualify you, that 1099-C will not be considered taxable income to you.
It is not working out that way, however. The form is not correct, so I am not able to get an accurate tax return filled out. It is messing up state more than federal. THAT is why I called the IRS. IRS rep confirmed that 1099-C should not have been issued at all on a non-recourse loan. They, in turn, told me to get the lender to correct it. The lender won't do it. lender says I need to contact a tax professional if I am having tax issues. Problem is that if I have incorrect forms to begin with, then I am not going to be able to file correct taxes..with or without a tax professional!

My brother lost his home, never got a 1099-C, filled out taxes with no issues.
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Old 02-16-2010, 07:04 PM
 
11,715 posts, read 40,451,929 times
Reputation: 7586
Link to the IRS form (with instructions) where you exclude the cancellation of debt from your income:

http://www.irs.gov/pub/irs-pdf/f982.pdf
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Old 02-17-2010, 09:37 AM
 
9 posts, read 71,365 times
Reputation: 13
Quote:
Originally Posted by EscapeCalifornia View Post
Link to the IRS form (with instructions) where you exclude the cancellation of debt from your income:

http://www.irs.gov/pub/irs-pdf/f982.pdf

I appreciate your attempt at helping, but this 'solution" only takes care of the problem on the federal end. You may or may not know that the state of CA is NOT complying with the Federal Mortgage Debt Relief Act. So while this "work around" cancels out the debt on the federal side, it does nothing to wipe out the debt on the state side.

The only way to NOT have to pay taxes on the "phantom" income (cancellation of debt income) on state taxes is for the bank to send a CORRECT form. Box 5 HAS TO BE checked NO.

How and why the bank is refusing to send correct forms out is maddening to me.
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Old 02-17-2010, 09:46 AM
 
11,715 posts, read 40,451,929 times
Reputation: 7586
Quote:
Originally Posted by Roxana Lee View Post
state of CA is NOT complying with the Federal Mortgage Debt Relief Act.
Really? They were when I did mine but that's been almost two years now. Sorry to hear California is sticking it to people now but I'm not that surprised.
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Old 02-17-2010, 10:25 AM
 
9 posts, read 71,365 times
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YEP. Our govenor suspended the debt Relief act as of 01-01-2009, in the hopes of bringing in THOUSANDS of tax dollars.
There are multiple bills being introduced to get CA back in line with federal, but he vetoed the last attempt.

IF the bank would send accurate forms, however, there would not be any issue.
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Old 02-21-2010, 11:14 PM
 
2 posts, read 23,733 times
Reputation: 10
Default New Bill AB1779 (Introduced by CA Assembly Member Niello, February 9, 2010)

Please pass this info to all homeowners who lost their property either thru foreclosure or short sale in 2009. There is a new bill AB1779 (Introduced by CA Assembly Member Niello, February 9, 2010) which will be in assembly on March 12. All home owners who lost their property must contact their local assembly member and request them to support this bill. The objective of the bill is to extend the tax forgiveness in State of CA till Jan 01, 2013. If the bill fails thousands of home owners who lost their property in 2009 will end up paying tax to CA FTB for their cancellation of debt 1099C sent by their mortgage companies.
Website to find the local assembly member:
Your Legislature
The pdf version of the BILL #: AB1779 can be found at the below location
http://www.leginfo.ca.gov/pub/09-10/...introduced.pdf
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Old 02-21-2010, 11:15 PM
 
2 posts, read 23,733 times
Reputation: 10
Default New bill AB1779 (Introduced by CA Assembly Member Niello, February 9, 2010)

Quote:
Originally Posted by Roxana Lee View Post
We lost our condo to a short sale, in CA.
Bank issued a 1099-C. (cancellation of debt form)
IRS confirmed that a non-recourse loan (loan was soley for the purchase of the home) DOES NOT result in Cancellation of Debt Income.

NO 1099-C should have even been sent to me or the IRS.

Bank refuses to correct it or remove it.

IRS said that I HAVE TO FILE IT if I got it, even if it is wrong.

NOW WHAT????
[SIZE=3]Please pass this info to all homeowners who lost their property either thru foreclosure or short sale in 2009. There is a new bill AB1779 (Introduced by CA Assembly Member Niello, February 9, 2010) which will be in assembly on March 12. All home owners who lost their property must contact their local assembly member and request them to support this bill. The objective of the bill is to extend the tax forgiveness in State of CA till Jan 01, 2013. If the bill fails thousands of home owners who lost their property in 2009 will end up paying tax to CA FTB for their cancellation of debt 1099C sent by their mortgage companies.[/SIZE]
[SIZE=3] [/SIZE]
[SIZE=3]Website to find the local assembly member:[/SIZE]
[SIZE=3]http://www.leginfo.ca.gov/yourleg.html[/SIZE]
[SIZE=3] [/SIZE]
[SIZE=3]The pdf version of the BILL #: AB1779 can be found at the below location[/SIZE]
[SIZE=3]http://www.leginfo.ca.gov/pub/09-10/bill/asm/ab_1751-1800/ab_1779_bill_20100209_introduced.pdf[/SIZE]
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Old 02-22-2010, 09:36 AM
 
9 posts, read 71,365 times
Reputation: 13
there are so many bills being introduced and RE-introduced on this issue. Maybe at least one of them will pass.
I will post this one the Facebookpages and chat sites that are dedicated to this issue!

Thanks
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