1099-A

[andreawick]

If a taxpayer receives a 1099-A, there isn't a taxable event necessarily, unless the TP also receives a 1099-C?

Here's the fact pattern:

TP owned a timeshare, they paid on it for a 4 or 5 years. Then could no longer afford it, and the lender re-acquired it and issued a 1099-A.

Box 2 of 1099A is $20,000. Box 4 is $80,000.

If my understanding is correct, unless they receive a 1099-C to show cancellation of the debt, there is no taxable event? Or am I mistaken?

Any help is greatly appreciated.

[taxref]

Its possible there is a taxable event which needs to be reported.  A 1099-A is treated as a disposition, which usually involves a gain or a loss.  

If the timeshare was for personal use, gains would be taxable and losses would not be deductible.  If it was rental or investment property, either a gain or loss would be a reportable event.  

Needless to say, its more complex than my (very) basic explanation.  Pub 4681 has the details.

[andreawick]

I follow what you're saying, but there is no way of calculating the gain?

Their basis would be what the paid for it, and the sales price would be zero, correct? Resulting in a non-deductible loss.

[taxref]

"...and the sales price would be zero, correct? Resulting in a non-deductible loss."

No.  The proceeds from the foreclosure is the lower of: 

A. The amount owed just before the foreclosure less the amount the client is still liable for, or
B. The FMV of the property.

To determine if there is a gain or loss at that point, one must subtract the basis from the lower of A or B above.  

I have omitted a step or two in this explanation for the purposes of brevity.  Page 12 of the current Pub 4681 has a good chart one can fill in.  Part 2 of the chart deals with your issue, but Part 1 has to be completed to get the numbers above.  

The bottom line is that, while there often is not tax because of a 1099-A, one cannot simply assume there will not be.  The right numbers need to be crunched to make sure.