Form 1099-A (2013): Acquisition or Abandonment of Property

What Form 1099-A (2013) Is For

Form 1099-A (2013) is an IRS tax form used to report when a lender acquires or becomes aware of the abandonment of secured property, such as real property, personal property, or business property. It helps the Internal Revenue Service track property transactions when a borrower defaults on a loan or abandons the property securing it. The form includes essential details, such as the fair market value, outstanding loan balance, and whether the borrower is personally liable for the debt, ensuring accurate tax purposes and compliance with reporting requirements.

Make sure you don’t have any unfiled federal income tax returns before reporting a foreclosure or abandonment event.

When You’d Use Form 1099-A (2013)

You would typically use Form 1099-A (2013) when a lender, bank, or other financial institution takes possession of or becomes aware of the abandonment of secured property:

• Foreclosure of Real Property: This is when a lender forecloses on real property, such as a personal residence, rental home, or land that was used as collateral for a recourse loan or nonrecourse loan.
  
  
• Abandonment of Secured Property: This is when a borrower abandons secured property, such as investment property, business property, or tangible personal property (e.g., office equipment or vehicles used for business purposes).
  
  
• Voluntary Transfer or Repossession: This is when a borrower voluntarily transfers ownership or returns property securing a debt to avoid foreclosure or additional foreclosure costs.
  
  
• Lender’s Acquisition: This is when a lender immediately acquires ownership of property securing a debt after the borrower defaults, resulting in a reportable event for the same calendar year.
  
  
• Combination with Form 1099-C: This is when a lender cancels debt and acquires property in the same year; in such cases, the lender may file only Form 1099-C instead of both forms, as it includes relevant property details.

Learn more about what happens if you receive a notice by reading our guide to the IRS collection process.

Key Rules or Details for 2013

• Who Must File: Any financial institution, lender, or entity that lends money and acquires an interest in secured property or has reason to know that such property was abandoned must file Form 1099-A with the Internal Revenue Service.
  
  
• Property Types Covered: The form was required for real property and tangible personal property used in a trade, business, or investment, but not for personal-use property such as a family car or personal residence.
  
  
• Abandonment Timing: A lender must report the acquisition or abandonment of secured property as soon as it becomes aware that the property has been abandoned. If foreclosure is expected within three months, reporting occurs upon acquisition; otherwise, reporting is due after this period.
  
  
• Coordination with Form 1099-C: When the lender cancels debt and acquires property within the same calendar year, only Form 1099-C may be required, since it includes the necessary property information.
  
  
• Filing Deadlines: Lenders were required to file Form 1099-A with the IRS by February 28 for paper filings or March 31 for electronic filings, and provide borrowers with their copies by January 31 of the following year.

See if you qualify to reduce your tax burden using IRS Form 982 for debt exclusions.

Step-by-Step (High Level)

These general steps outline how to handle Form 1099-A (2013) for tax reporting and calculation of any gain or loss:

1. Verify the Information: Review all information on the form, including the property’s fair market value, outstanding loan balance, and whether you were personally liable for the debt, as incorrect details can affect your tax liability.
   
   
2. Determine Tax Treatment: Identify whether your loan was a recourse or nonrecourse loan, as this determines whether your amount realized is based on the property’s fair market value or the full loan balance.
   
   
3. Calculate Gain or Loss: Compute the gain or loss by subtracting your adjusted basis (original purchase price plus improvements minus depreciation) from the amount realized, as required for tax purposes.
   
   
4. Report on Your Tax Return: Record the transaction on Schedule D and Form 8949 for personal property, or on Form 4797 if it involves business or investment property, depending on the property’s status.
   
   
5. Check for Exclusions: Consider whether exclusions, such as the home sale exclusion or the insolvency exclusion, apply, which may help reduce or eliminate taxable income from debt cancellation or property disposition.

For business, rental, or investment properties, you can obtain your business tax transcript to verify tax data reported to the IRS.

Common Mistakes and How to Avoid Them

Many taxpayers make errors when reporting Form 1099-A (2013) transactions, which can lead to unnecessary tax notices or penalties. 

• Ignoring the Form: Some borrowers mistakenly think they do not need to file anything after losing or abandoning property; however, the IRS receives a copy of Form 1099-A and expects the event to be reported on the taxpayer’s return.
  
  
• Confusing Form 1099-A and Form 1099-C: Form 1099-A reports the acquisition or abandonment of secured property, while Form 1099-C reports the cancellation of debt; each form serves a different purpose and must be handled separately to avoid double reporting.
  
  
• Using the Wrong Amount Realized: Taxpayers sometimes use the outstanding loan balance instead of the property’s fair market value for recourse loans, which can cause overstated capital gains or losses.
  
  
• Failing to Claim Exclusions: Many filers overlook available exclusions, such as the home sale exclusion or insolvency exclusion, which can eliminate or reduce taxable income from canceled debt.

If you’re unsure how to report your foreclosure or abandoned property, start your free case review for professional help.

What Happens After You File

After you file your tax return with information from Form 1099-A (2013), the Internal Revenue Service matches the data reported by your lender using your taxpayer identification number. If inconsistencies appear between your return and the lender’s filing, you may receive an IRS notice, such as CP2000, that proposes adjustments to your taxable income or capital gains. 

FAQs

How does fair market value affect my taxes when reporting Form 1099-A (2013)?

The fair market value represents the property’s sales price at the time of acquisition or abandonment. It determines whether you have a capital gain or capital loss when compared to your adjusted basis.

What happens if my lender reports a canceled debt along with the property transfer?

When a lender reports canceled debt, the amount may create debt income that must be reported unless you qualify for an exclusion. In some cases, qualified principal residence indebtedness may allow you to exclude this income if the canceled debt relates to your primary home.

Do I need to report debt income if I abandoned secured property?

Yes, even when property is abandoned, you must report the transaction on your tax return to reflect any resulting debt income or gain from the abandonment of secured property. Depending on the property type and your financial situation, specific exclusions may reduce the tax impact.

What if my Form 1099-A shows a fair market value higher than the loan balance?

If the property’s fair market value exceeds the outstanding loan balance, you may have a taxable gain. However, any remaining debt that is later forgiven could result in additional reporting under Form 1099-C, subject to applicable exclusions.