Hello,
I purchased a Las Vegas rental home in 2007 for $500,000 in a private sale. I 'informally' assumed the existing $450,000 loan from the seller. The loan I assumed was the original purchase loan. This not structured as an installment sale.
In 2012, my tenant moved out and I deeded the house back to the Seller (right before his Short Sale). The house sold for $180,000 to an unknown third party.
The Seller received a 1099-C for roughly $278,000 and he's naturally very upset. The Seller originally purchased the property for $575,000 and I understand that he wrote off the original loss of $50K ($575K-$550K) in 2007.
Over the years, I've been paying for the mortgage, taxes, etc. and reported it all on my Sch E with a note that the loan was still under the seller's name.
Can he amend his 2007 tax return? If he purchased it for $575K and sold short for $180K in 2013, wouldn't that mean a $395K loss to him? Which year would he report the additional loss? How can he offset or report the 1099-C for $278K issued in 2013? Thanks for your help on this. I don't him any more upset than he is, and I believe he is being given misinformation.