If the 1099-A form is the correct form, are we protected by this new Mortgage Relief Act? Here’s the info from my 1099-A form:
Principal outstanding $ 76,396.22; FMV $ 65,450.00; Was borrower personally liable for repayment of this debt? “Yes” (how can this be “yes” when it was discharged in our BK-7?!) With this info., what needs to be done on our income taxes this year? Which discharge box w/b the correct one to check on the 982 form in our case?

Sorry about the tons of questions, but Wells Fargo just seems to try to jerk us around at every turn, no matter how hard we tried to work things out with them. They’ve got my “dander” up. Thank you!

Additional Details
Re: Reaffirmation
We signed a reaffirmation form w/ our attorney that they sent to Wells Fargo during the beginning stages of our BK-7 filing. Wells Fargo never responded to that form, thus not taking us up on our reaffirmation offer. Our loan w/ them even shows up on our credit report as “Discharged in Ch. 7 Bankruptcy”. The reaffirmation definitely never happened. And Wells Fargo’s “tax team” is trying to say that the 1099-A form is the correct form because of the fact that we abandoned the property. I am so tired of Wells Fargo’s bullying me on this that I feel like trying to sue them over the whole issue. Just another tidbit that our BK atty brought up– when the foreclosure was filed, an “in rem” judgment is what was filed, which tells her also that we should not have been mailed any sort of 1099 form from Wells Fargo.

Best answer:

Answer by Charles G
From the IRS Pub 4681http://www.irs.gov/publications/p4681/ch01.html#d0e437

Qualified Principal Residence Indebtedness

You can exclude canceled debt from income if it is qualified principal residence indebtedness. Qualified principal residence indebtedness is any debt incurred in acquiring, constructing, or substantially improving your principal residence and which is secured by your principal residence. Qualified principal residence indebtedness also includes any debt secured by your principal residence resulting from the refinancing of debt incurred to acquire, construct, or substantially improve your principal residence but only to the extent the amount of debt does not exceed the amount of the refinanced debt.

But, if you really want to report the thing, put it on a Sch-D, showing the (personal, nondeductible) loss. You will need to know the cost basis of your house for that.

Note: Wells Fargo is doing that to get the debt/bad loan off their books. It is not because of any personal malice. And, it might not have been an oversight for them not to reaffirm the loan.

What do you think? Answer below!

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