Welcome Guest. Register Now!  



Reply
 
LinkBack Thread Tools Display Modes
  #1 (permalink)  
Old 01-28-2012, 03:02 PM
Junior Member
 
Join Date: Jan 2012
Posts: 1
Confused about how Form 1099-A will affect my 2011 taxes

My partner and I were owners of a time share (based on a point system). We have been working with a company to help us get out of our time share. The time share company has said we are no longer under contract with them. They sent us a letter in Oct stating they had terminated our time share contract. My recent Equifax Credit Report shows a status of "Paid as agreed; time share account is closed or Paid account/Zero balance. Today I received a Form 1009-A from this time share company showing a balance of over $8000 and box 5 is checked saying I was liable for repayment of debt. I'm confused as to why they sent this form to me since the reported to Equifax that my account with them is closed. I also want to know will this $8000 be seen as income?
Thanks for any help with these questions!



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #2 (permalink)  
Old 01-29-2012, 08:24 AM
Moderator
 
Join Date: Oct 2010
Posts: 2,714
“Today I received a Form 1009-A from this time share company showing a balance of over $8000 and box 5 is checked saying I was liable for repayment of debt. I'm confused as to why they sent this form to me since the reported to Equifax that my account with them is closed.”----->As you can see, basically, if your house goes into foreclosure and it sells for less than what you owe on the property, there will be a deficiency. As a borrower, you're liable to pay it off. In case, your lender forgives this deficiency, it'll be considered as your taxable income. You'll be sent a 1099-A Form by the lender and you'll have to report the income to the IRS. Timeshare is treated equal to real estate in the eyes of the law, and it follows the same rules and regulations as a homeowners deed. Similarly, if your lender modifies the terms of the loan and it results in cancellation of a certain portion of the debt, the cancelled debt amount will be taxed by the IRS. Your lender is required to report the deficiency from the foreclosure or the short sale to the IRS for tax purposes. This is why they send you 1099-A Form, which is mainly for informational purpose. However, if you receive a 1099A Form, it doesn't mean the deficiency has been forgiven. If the lender forgives the debt, you'll receive a Form 1099-C. It suggests that the remainder of the debt has been cancelled and the lender will not come after you to collect the debt. You'll be required to report this as your income on the tax return. The lender can come after you in future to collect the debt.Did you get loan from the company?? . Your timeshare can foreclose in the same way as your home if you stop making payments and this does not just mean payments on the principal balance, it also includes yearly maintenance fees. I guess you need to contact the time share company for more info in detail.
“ I also want to know will this $8000 be seen as income?”------>As said previously, you need to contact the company; it can be your taxable income on 1040 line 21.But the Mortgage Forgiveness Debt Relief Act, 2007 does allow you to exclude the cancelled debt amount from your gross income under certain conditions such as the debt should have been canceled by the lender in the years 2007 through 2012; the debt should have been taken to buy, build or improve a PRINCIPAL residence, (NOT TIME SHARE, I mean).Second homes, rental property or vacations homes are not applicable here;the tax relief is limited to debt amount of $2 million.



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
Ads
Reply


Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

vB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Why have I not received my Form SSA-7004 (Request for Social Security Statement) in 2011? TaxGuru For 2011 0 12-07-2011 08:27 PM
2010 taxes paid in 2011 brwwood S-Corporation 1 04-02-2011 04:52 AM
1099-A received - How will this affect me? markopolo Income 1 02-04-2011 01:16 PM
Confused on 1099 sent to us River525 Income 3 01-30-2011 02:34 PM
How did the New Law affect the Energy Savings Tax Credit in 2011? TaxGuru Tax Credit 0 01-12-2011 09:03 PM

Follow us on Facebook Follow us on Twitter Google Buzz Rss Feeds

» Categories
 
Individual
 » Income
 » IRA/Sep
 » Medical
 
Corporations
 » Payroll
 
Forum for CPAs
 
Financial Planning