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Entering 1099-A and 1099-C in Lacerte
by Intuit• Updated 1 year ago
Where is cancelation of debt income entered in the program?
This depends upon whether the property is personal or business.
Personal property:
Cancelation of debt income from personal property:
Enter on Screen 14.1 Miscellaneous Income, in the Alimony and Other Income section, in the field Cancelation of debt (1099-C) (code 6 or 56):
Qualified Principal Residence Exclusion:
The Mortgage Relief Act of 2007 allows for an exclusion of up to $2 million (or $1 million if married filing separate) of cancelation of debt from income if it was from qualified principal residence indebtedness. The discharge of indebtedness for a qualified principal residence can be entered in Screen 14.1 Miscellaneous Income, in the Alimony and Other Income section, in the field Qualified principal residence exclusion (code 7 or 57). Generally, if you exclude canceled debt from income under one of the exclusions listed above, you must include Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness. (see Exceptions section above).
The gain from foreclosure for personal property:
Enter on Screen 17, Dispositions. The following entries should be made:
- Description of property
- Date acquired
- Date sold
- Sales Price
- Cost or other basis
If the property was the taxpayer's principal residence and there is a gain from foreclosure to recognize, the taxpayer may be able to exclude this gain under Section 121, if they meet the ownership and use requirements. Entries should also be made in the Sale of Home section to compute any allowable Section 121 exclusion:
- Sale of home (MANDATORY to commute exclusion)
- 2 year use test met (full exclusion)
If the transaction results in a loss, then instead of Sale of Home the entry should be made in the following field, in the section labeled Schedule D. Any loss from the foreclosure of personal property is not deductible.
Business Property:
Cancelation of debt income on business property:
This should be reported as income in the business activity in which the property was used. For example, if the property was a rental home, the cancelation of debt income should be entered as "Rents received" in Screen 18, Rental & Royalty Inc. (Sch. E). If the property was used in a Schedule C business, then the cancelation of debt income would be entered in the field Other income in Screen 16, Business Income (Sch. C). Cancelation of debt income on business property should not be entered in Screen 14.1.
Gain or Loss from Foreclosure or Repossession:
A foreclosure or repossession is treated as a sale or exchange, and gain or loss may need to be recognized, even if the property is voluntarily returned to the lender. The gain or loss from foreclosure or repossession is computed independently from the computation of cancelation of debt income. The gain or loss from foreclosure or repossession is the smaller of the debt discharged by the lender or the fair market value of the property, plus proceeds received from the foreclosure sale, minus the adjusted basis of the property. The second part of the Worksheet for Foreclosures and Repossessions from IRS Pub. 544 or Pub. 4681 (referenced above) can be used to compute the gain or loss from foreclosure or repossession:
The gain or loss from foreclosure can be entered in Screen 17, Dispositions, or Screen 22, Depreciation if the property is business property already being tracked in the Depreciation screen. In reporting the gain or loss from foreclosure, the Sales price entry should be the lesser of:
a) the amount of outstanding debt immediately before the foreclosure (amount canceled/forgiven); or
b) the fair market value of the property
plus
any proceeds received from the foreclosure sale
In Screen 22 Depreciation the following entries are required:
- Date sole, disposed, or retired (MANDATORY)
- Sales price (-1=none)
Or if the transaction is reported in Screen 17 Dispositions, the following entries are required:
- Description of property
- Date acquired
- Date sole
- Sales Price
- Cost or other basis
- Depreciation allowed
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