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Level 2
February 12, 2021
Solved

Form 1099 Misc box 3

  • February 12, 2021
  • 5 replies
  • 49 views

My client received a 1099 Misc with payment in box Number 3. She had a lawsuit because she lost a property that was jointly in the name of her and two siblings. Her brother took out a mortgage without her knowledge and the property was foreclosed on without her knowledge. How do we treat this income in box three.

 

Thank You

Rose

This topic has been closed for replies.
Best answer by qbteachmt

"She had a lawsuit"

And this is the Settlement. It isn't the sale or the foreclosure debt forgiveness. 1099-Misc is for the lawsuit settlement. Not property damage or personal injury settlement, right? That's not part of the sale.

The IRS has guidance:

https://www.irs.gov/government-entities/tax-implications-of-settlements-and-judgments

https://www.irs.gov/pub/irs-pdf/p4345.pdf

 

 

5 replies

BobKamman
Level 15
February 12, 2021

Received from whom?  Her brother?

rose annAuthor
Level 2
February 14, 2021

This 1099 Misc is from the Bank and at the bottom it says For Your Records

BobKamman
Level 15
February 15, 2021

That's an interesting question.  I would treat it as a sale, with the 1099 as proceeds.  She didn't get her interest in the property back, did she?   But when did the foreclosure happen?  Before 2020?  And what, if anything, did she report on her tax return that year?  And has the entire case settled yet?  Did her brother pay her anything?  The notary who witnessed the forged signature?  

qbteachmt
qbteachmtAnswer
Level 15
February 15, 2021

"She had a lawsuit"

And this is the Settlement. It isn't the sale or the foreclosure debt forgiveness. 1099-Misc is for the lawsuit settlement. Not property damage or personal injury settlement, right? That's not part of the sale.

The IRS has guidance:

https://www.irs.gov/government-entities/tax-implications-of-settlements-and-judgments

https://www.irs.gov/pub/irs-pdf/p4345.pdf

 

 

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rose annAuthor
Level 2
February 18, 2021

I thank you for your assistance with this issue.

The client did sue the bank on behalf of herself and her disabled sister and won a judgement.