Tammy Mitchell Hines & Co. House to Home Newspaper Apr. 2014 Edition | Page 2

Hanover Estates 4 LOTS • $59,000 EACH Bring Your Own Builder, lots available are between 2.50 acres to 4.34 acres. EXT 2956 ON THE HOME FRONT FORGIVEN LOAN DEFICIENCIES Become Taxable Again in 2014 by Ilyce Glink and Samuel J. Tamkin Q: My home was foreclosed on in 2013. I received a 1099-A with the fair market value listed as $105,000. My local county tax website records show the foreclosure sale at $139,753. These are very different numbers to use when filing taxes for 2013. I am not sure what to do. A: Form 1099-A is the form the bank uses to report to you and the IRS certain information relating to your foreclosure. The important information is the amount of the debt you owed and the fair market value of the home. This form would be used by you to determine any phantom income tax you might owe. That is to say, when you lost the property and your lender forgave your debt, the difference between the value of the home and the amount of the loan that was forgiven (where the debt is higher) would be considered income to you. If your home was your primary residence, and you went into foreclosure before the end of 2013, you won’t have to worry about paying 2 $105,000 and the foreclosure sale reflected the amount owed to the lender on the loan at $139,753, the deficiency or difference is $24,753. That deficiency would be considered income to you under normal circumstances, as well as if this property was your second home or an investment property. For homes that went into foreclosure (or were subject to a short sale) in 2013, borrowers needn’t worry about taxes on the forgiven deficiency if this home was a primary residence. If the home in question wasn’t your primary residence, the 1099-A form will indicate the amount of the debt you owe and the difference between those numbers will be income to you and increase your tax bill to the IRS. You’ll have to talk to the person that helps you with your taxes to see if there are other exceptions you may use to avoid paying tax on that money. But based on your letter, you probably are fine and don’t need to do anything other than give the form to your tax preparer and tell him you lost your primary residence in foreclosure to your lender. tax on this phantom income. That phantom income is exempted due to a law that lapsed as of January 1, 2014. Homeowners who lose their homes in 2014 may have to pay income taxes on the deficiencies (the difference between what was owed and what the home ultimately sold for) forgiven by their lenders. Consider this: If your lender lists the fair © 2014 Distributed by McClatchy-Tribune market value of your primary residence as Information Services Publisher Tammy Mitchell Hines Managing Broker Assistant Sherrie Snow Tammy Mitchell Hines & Co. 207 N. Main Street, Suite 101, Columbia, IL 62236 6797 N. High Street, Suite 213 Worthington, Ohio 43085 1-877-872-3080 • www.DiscoverPubs.com Sudoku, Scrabble, Wolfgang Puck’s Kitchen, etc. distributed by Tribune Media Services. © Copyright 2014 by Discover Custom Publications, Inc. All rights reserved.