Abandonment of Property - Form 1099-A

[Guest]

A friend of mine has financial difficulties. She was not able to make mortgage payments and has abandoned her property since 2012. She's lived with relatives since then.

She applied for a deed-in-lieu with the bank but they said no. The bank also said the home modification program did not work for her because she didn't have a job (she still doesn't). After 3 years, she received a 1099-A from the bank showing that the fair market value of her abandoned property higher than the amount that she owes. Does this 1099-A mean the bank has reprocessed her property? Should she report the 10099-A figures on her tax return? Thanks.

 

[Michael Wechsler]

Typically when you receive a 1099-A it means that there has been a foreclosure or sale of your home. If the fair market value is higher than the amount owed, it is possible that you may owe tax. The 1099-A form will give you information but it doesn't necessarily mean that anything on it must be reported. You will probably want to review the information as well as any other related documentation that refer to related transactions with your tax preparer. Good luck.