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'cancellation of debt' capital gains ???

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Ladynred

Senior Member
A year and a half ago I had to let go of my house, I had moved to another state for a new job. The house was on the market for 8 months prior to my letting it go and would not sell, heck, we couldn't even get it rented, despite putting in quite a bit of money to do some 'upgrades' to it.

The house finally sold at auction this past December (even took the bank over 6 months to sell it !!!!). The other day, I get a 1099-A form in the mail. I've read the documentation in Pub 554 (?) about capital gains/losses and it just managed to confuse me even more. I don't know what to DO with this thing ! I haven't filed my 2001 taxes yet.

To complicate this story, there was a 2nd mortgage on the house, a home equity loan I had taken out some years ago to put on a new roof and siding. The 2nd mortgage company, it seems, never even tried to get what it was due in the foreclosure, and they are hounding me for the money now. I was laid off on 2/1, I can barely pay my current rent and utilities on unemployment, let alone pay these people !

According to my brother (much older and wiser than I) on this 'cancellation of debt' gain/loss, I need to add the amount of the 2nd mortgage to the amount on the 1099-A and that will change the calculation. The FMV listed on this form is 87K. The house sold for 80K, and the form shows I owed 68K on the 1st mortgage. My brother also has the receipts for the money we put into the house to get it ready to sell. If you add in the amount from the 2nd mortgage, the total amount of loans on the house was approximately $100,000.

I'm lost. In my current situation, having to PAY the IRS on top of all the other creditors would be a major disaster. I'm already considering bankruptcy. What exactly do I do with this 1099-A and how do I figure in this 2nd mortgage ??? What about the 'fix-up' expenses ?

Help ! :confused:
 


JETX

Senior Member
Simply, the lender gave YOU a certain amount of money (you spent it on the house) and you didn't pay them back. The use of the 1099 reflects the amount of money that they 'foregave' in your breach of the repayment agreement. As such, you can't add the 2nd mortgage to it, since that money hasn't been "1099'd" (not reported.... yet).

You need to report the amount on the 1099 as 'income from another source'.

I would suggest you might want to use one of the income tax preparation firms to help you understand this when they do your taxes.
 

Ladynred

Senior Member
Thanks, but I'm still confused as to whether or not I have to pay capital gains. The form says something like "if the amount in box 4 is LESS than box 3, then you have a gain".. well the amount in box 4 is MORE than the amount in box 3... so, I'm still stuck. The IRS instructions that were supposed to clarify how to determine this didn't clarify it at all.

As for consulting a tax prep firm... H&R charged me $125 last year, I simply cannot afford to pay out that kind of expense right now.
 
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I AM ALWAYS LIABLE

Senior Member
My response:

Just a side note having nothing to do with your post - -

I was noticing your Board name, and was wondering if you know who the "Lady in Red" was, and the story behind that moniker?

IAAL
 

Ladynred

Senior Member
Lady in Red ?

Are you referring to Dillinger's girlfriend perhaps ???

I don't know the whole story about her, but I know a bit :)
 

I AM ALWAYS LIABLE

Senior Member
My response:

http://www.crimelibrary.com/americana/dillinger/images/VV586 Anna Sage.jpg

http://www.crimelibrary.com/americana/dillinger/images/APA4935861 Dillinger Wanted Poster 1934.jpg


Two people who would play a major role in the demise of John Dillinger outside the Biograph Theatre were Martin Zarkovich of the East Chicago Police Department and Anna Sage, who would become infamous as the “lady in red.” There is much mystery surrounding the pair and their connection to John Dillinger, which may have occurred years prior to the Biograph incident. Another disturbing factor in the relationship involving the three is how it tied back to a corrupt political atmosphere in East Chicago and to the Crown Point prison breakout.

Ana Cumpanas was born in 1889 in a small village in Rumania. She married Michael Chiolak and moved to the United States in 1909 and settled in a Slovenian neighborhood around the steel mills of East Chicago, Indiana. Anna Chiolak gave birth to a son, Steve, in 1911. By the end of the decade the marriage was over and Anna was supporting herself and Steve as a prostitute and later as a madam at the establishment of “Big Bill” Subotich’s in East Chicago.

By 1933 Sage was running a house of prostitution out of a bar she operated on North Halsted Street. All the while she kept up her reputation in the Rumanian community, which surrounded the area of her bar. She was said to have attended church regularly and entertained lavishly in her North Halsted Street apartment, located just around the corner from the Biograph theatre.

On Saturday afternoon July 21, Zarkovich and O’Neil telephoned Purvis and told him they wanted to meet in a secluded place to discuss turning over Dillinger. Purvis claims that he had previous contact with the pair and had exchanged information with them. Purvis arranged a meeting in Cowley’s room at the Great Northern Hotel at 6:00 that night. The plotters told Purvis and Cowley that Dillinger and Polly Hamilton were frequent visitors at the home of Anna Sage and the three were in the habit of visiting neighborhood theatres. Zarkovich told the agents it was Anna’s wish “to make contact with the federal government officials.”

The “contact” was set for 9:00 that night on a dark north side street. Jay Robert Nash claims Purvis enjoyed a coup by engineering the meeting so that only he was present to speak to Sage. When the two cars arrived at the designated location, Purvis and Zarkovich were in the first car and Cowley and O’Neil in the second.

In Melvin Purvis’s autobiography American Agent he describes the meeting:

“About nine o’clock Anna Sage appeared. She walked past our car and down the street, seeming to survey the situation to determine that there was no trap set for her. She returned and on a signal got into the car. We drove for a while and finally stopped at a secluded spot by the side of Lake Michigan. There she told the story of her acquaintanceship with John Dillinger.

“She was at the time under an order of deportation for violation of a law of the state of Indiana. She seemed to be primarily interested in whether she could trust me. We then came to the point of discussing her desire to remain in the United States. She seemed particularly anxious to do so and had a great fear of deportation. She had reared a son in the United States. It was natural that she should wish to stay here.”

Purvis claims he made it clear that his authority was limited. However, he states he agreed to recommend that Sage be allowed to remain in the United States before Anna said she would contact him the next time Dillinger (who she says was using the name Jimmy Lawrence) came to her home. Sage told Purvis that they – Dillinger, Polly and herself – sometimes went to the Marbro Theatre and it was possible they might go there again soon. That same night Purvis had agents surveying the theatre making notes and maps showing all the exits and fire escapes. The following morning, Sunday, July 22, a meeting was held at FBI headquarters in the Banker’s Building to review the notes and maps and create a plan of action.

At 5:00 that afternoon, while the agents were still reviewing their plans, Purvis’s private phone rang. It was Anna Sage. In a whispered voice she said, “He’s here, he’s just come in. We are leaving in five minutes. We will go to either the Biograph or the Marbro.” With that she hung up.

This created one of the first mysteries of the night’s events. Sage lived right around the corner from the Biograph, which was showing the new gangster flick, Manhattan Melodrama, starring Clark Gable (the Marbro was presenting Little Miss Marker with Shirley Temple). At 5:00 she claimed they were leaving in five minutes. The trio wasn’t spotted until 8:15. Where had the three been for the last three hours and fifteen minutes?

Purvis decided to stake out the Biograph instead. Meanwhile two other men were posted at the Marbro. Historians tell us that one of these men was Zarkovich, since he could spot Sage. The plan was to call the office every five minutes to see if Dillinger had been spotted at either location.

Purvis sat in an automobile sixty feet south of the Biograph. At approximately 8:15 Dillinger, Hamilton and Sage came around the corner from North Halsted onto Lincoln Avenue. As Dillinger purchased the tickets, one of Purvis’s first thoughts was that he was glad to see the man was not wearing a jacket, “because it meant that he could not have many weapons concealed on his person.”

Purvis purchased a ticket and entered the theatre, hoping to find three open seats behind his quarry, but claims he could not find the trio in the darkness and left instead of moving further down the aisle and possibly drawing attention. Purvis left the jammed theatre and waited for the other agents and the five members of the East Chicago Police Department. Nobody from the Chicago Police Department had been notified.

It was believed that when the trio left the theatre they would take the same way back to Sage’s apartment. Therefore Purvis stationed himself just south of the theatre entrance with the plan to light a cigar when Dillinger and his companions passed. With advertisements and newsreel footage the movie would run two hours and four minutes. This gave the agents, most wearing jackets, plenty of time to sweat it out in the still plus 90 temperature.

Perhaps the most nervous man at the scene was Purvis. In American Agent he provides a candid view of his thoughts:

“There is no way of knowing whether Dillinger would stay for the whole show. Some patron in the theatre might arouse his suspicions, causing him to leave before the expiration of the two hours and four minutes. Our vigilance could not be relaxed for even a split second. I bit off the end of the cigar and nervously chewed on it for more than two hours. I could not leave my post for a drink of water, and my throat was parched from the cigar, from fright and from nervousness. My knees wouldn’t stay still. I knew that we could not let him escape this time. We would never have another opportunity like this.”

It may have been Purvis’s own nervousness, and his continuous checking with the ticket booth lady, that caused her to summon the theatre manager who, in turn, called the police. When they arrived, one of the agents told them they were on a stakeout and that they should remove their squad car from the vicinity immediately, a request they complied with, according to Purvis.

It is interesting to note that in all of the biographies of Dillinger they include the fact that the Chicago police showed up and were quickly instructed to leave. However, in the Chicago Daily Tribune’s first report of the shooting the following is revealed:

“…(the agents) actions seemed, to the theatre manager and to the observers in the neighborhood, to be so suspicious that the Sheffield Avenue police were notified. Policemen Frank Slattery, Edward Meisterheim and Michael Garrity, who investigated, were shown federal badges by the watchers.”
Just after the squad car was ordered away from the area the theatre began to let out. Purvis strained his eyes desperately looking for one man as the patrons exited. He soon spotted Dillinger between the two women. “He looked into my eyes; surely he must have seen something more than casual interest in them, but apparently he didn’t recognize me, and I struck the match and lit my cigar,” Purvis recalled.

Purvis recalls that as he gave a signal to close in, the officers were slow to react and his heart began to pound, but then Dillinger was surrounded. He states, “I was about three feet to the left and a little to the rear of him. I was very nervous; it must have been a squeaky voice that called out, ‘Stick ‘em up, Johnnie, we have you surrounded.’” Purvis recalls that he ripped every button off his jacket drawing his own weapon, which he didn’t get a chance to fire.

Dillinger began to take off, allegedly reaching into his pants pocket to draw a weapon. Lawmen with drawn guns were on top of him and fired. He dropped halfway into an alley. He was turned over, but he couldn’t speak, he was dead. Purvis describes the scene:

“Probably I will never forget, although I would like to, the morbidness displayed by the people who gathered around the shooting. Craning necks of curious persons, women dipping handkerchiefs in Dillinger’s blood. Neighborhood business boomed temporarily. The spot where Dillinger fell became the mecca of morbidly curious.”

Purvis says that he had a spot of Dillinger’s blood on his pants cuff and a few days later was offered $50 for the trousers.
 

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