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Old 02-21-2014, 12:59 AM
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Join Date: Jul 2013
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Net Carry Over Loss on Foreclosed Residential Property

Hello Experts,

Please help me, I think I'm in hot waters.

I foreclosed a property, our residence in Torrance, CA last 2009. My first preparer by the name of Preparer A then reported the loss of $300,000 but did not touch my gross wages.

Now I heard that this (another) preparer, Preparer B can use my foreclosure so at least I could have refund.

So I amended my 2009 last 2012. However, later in 2013, I received a letter of disallowance from the IRS.

I let Preparer B do my returns for 2011 and 2012. My 2011 return did not have any net loss thereon. However, my 2012 had still some $100,000 carry over losses.

Since, I received that disallowance I have decided to look for another preparer.

My concern is about my 2013 return. Should I let my NEW tax preparer, Preparer C ignore the carryover loss OR should I go on applying the carry over losses.

Before I could do my taxes on my own, but this time it's beyond me.

I am having audit nightmares already!

Please help me



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Old 02-21-2014, 06:48 AM
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Quote:
Originally Posted by justr8hr View Post

My concern is about my 2013 return. Should I let my NEW tax preparer, Preparer C ignore the carryover loss OR should I go on applying the carry over losses.

Before I could do my taxes on my own, but this time it's beyond me.

I am having audit nightmares already!

Please help me
I guess so aslongas you got a letter of disallowance from the IRS on the refund, you need to subtract the $100K loss c/f to your 2013 return. I guess you need to contact the IRS for more info in detail/for sure. I guess ths is the best/the most accurate way for you



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Old 02-21-2014, 12:48 PM
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Net Carry Over Loss on Foreclosed Residential Property

Thank you for the fast response Wnhough!

That's my first inkling actually to carry it forward.

However, I read some publication saying that loses of this kind--foreclosure of main home should only be reported (like what Preparer A did) not considered a deduction.

I was guessing that the reason the amendment was disallowed because it was wrong in the first place, that's why IRS disallowed it then asking me to produce more supporting docs.

If I carry the losses forward, don't you think I would be perpetuating the error made by Preparer B?



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Old 02-22-2014, 04:23 AM
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Quote:
Originally Posted by justr8hr View Post

#1;However, I read some publication saying that loses of this kind--foreclosure of main home should only be reported (like what Preparer A did) not considered a deduction.

#2;I was guessing that the reason the amendment was disallowed because it was wrong in the first place, that's why IRS disallowed it then asking me to produce more supporting docs.

#3;If I carry the losses forward, don't you think I would be perpetuating the error made by Preparer B?
#1; I guess it depends. Foreclosures are treated as the sale of property for federal tax purposes. Homeowners going through a foreclosure will need to calculate their gain or loss for tax purposes, as well as consider any income tax that might be due on the forgiveness or cancellation of debt. even if normally a loss taken on the sale of personal property, including a house, is not tax-deductible, you can take a write-off in certain limited circumstances; so,any loss you take on the sale of a personal residence is not deductible under any circumstances. In genral, the foreclosure of your personal home imposes additional reporting requirements of the transaction on your return. The foreclosure can either increase the amount of tax you owe, or provide deductible losses that reduce taxable income. Failure to comply with reporting requirements can obligate you to pay additional penalties and interest.For example, recourse mortgages require you to make additional payments to the lender in the event that a home's FMV is less than the outstanding loan balance. If, after the foreclosure, the lender forgives the additional loan balance due, the IRS includes the forgiven amount in taxable income for the year on 1040 line 21. aslongas you have a nonrecourse mortgage, you are not responsible for the outstanding loan balance after a foreclosure. Debt forgiveness on a nonrecourse loan does not require you to report additional amounts of taxable income. If the foreclosed property was your primary residence, you report the foreclosure sale on your Sch D/8949, and you may qualify to exclude up to $250k of gain from income tax.
If the foreclosed property was your personal use property, but not your primary residence, such as a second home or vacation home, then you'll report the foreclosure sale on your Sch D/8949. You need to see a qualified tax professional. Look for an Enrolled Agent/ CPA in your local area for more accurate help.


#2;sorry I have no any clue ‘ it is beyond me.I do not wanto to misinform you abut the issue.

#3; Are you talking about the carryover loss from years of having losses on the (IS it residential rental )property and only being able to deduct $25K per year or less depending upon your AGI? If you had suspended losses carried over from prior years, you are able to deduct them in full when the property is disposed of/sold. If you did not do this, then you should amend your 2010 tax return to report these losses. Or are you talking about a loss that occurred at the time of the sale when reporting the sale on Form 4797 on your tax return? Providing this was rental property with no personal aspects to it, the full loss is deductible at the time of the sale. You do qualify to carry over "the disallowed passive loss from iour rental activity incurred in the prior years tax return. This carry over loss is reported on Form 8582, and the loss is reported on Line 1c as a negative number.

Assuming you qualify for the deduction, this deduction would flow to Sch E line 23 tax return. Thereafter, it would eventually flow to Form 1040 page Line 17 again as a negative number that would allow you to offset your regular taxable income.frankly I am not very clear what your situation is.



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