scclark9

[scclark9]

What is the name of your state (only U.S. law)? fl

Hi,
I hold a second mortgage on a piece of real property currently in foreclosue. How do I report income from the trustee on my taxes? Te debtor in under reorganiztion and pays me so much money per month on his debt. Is this investment income and can I deduct legal expenses?

Thanks

 

[tranquility]

How was it reorganized? What has changed? While the character of the income should remain the same, what is or is not income may be different.

 

[scclark9]

it began in 2002 as a 10,000$ earnest deposit on a piece of property that was sold to someone else. The earnest money was not repaid. After litigation, it was determined to be a breach of contract and I was awarded a second mortgage on the entire piece of property. During the interim, the property was divided into 2 parcels. In 2007, I released the mortgage on the piece owned by a bank for 7500.00 I reported that as income and my legal fees as expenses. I received no other money for the remaining parcel until 2009. However, I continue to incur legal fees because I continue to have to defend myself as a creditor in the bankruptcy reoganization ( i am currently a creditor per the court but the debtor keeps taking me back to court to disprove my claim over, and over again).

My question is, did I correctly report the 7500 as income and the legal fees as expenses in 2007? I have an auditor telling me I should capitaize expenses. But if the investment produces a taxable income, aren't the legal fees expenses?

I have 11000, in 2009 , income from the bankruptcy on a 1099misc I received from the trustee. I want to file it correctly as I am so tired of being audited.

Thanks

 

[tranquility]

That seems just a bit different from your first question. Just a bit. Just a tiny little bit. Just a tiny little bit to be fricking hilarious. (I use that term as this is CA no cuss week.)

See a tax professional. You need to go through the facts pretty carefully as you may have more than one thing going on here. I understand you want it to be just a fill in the box answer, like "put it on line 5" or something, but each step and the results need to be looked at. I think it unlikely you can get anyone with the ability to do so in this forum go through the steps at this time of year. Sorry. I could be wrong or may be over-complicating something where the rubbish can be stripped away and a quick answer can be had, but I don't think so.

 

[LdiJ]

That seems just a bit different from your first question. Just a bit. Just a tiny little bit. Just a tiny little bit to be fricking hilarious. (I use that term as this is CA no cuss week.)

See a tax professional. You need to go through the facts pretty carefully as you may have more than one thing going on here. I understand you want it to be just a fill in the box answer, like "put it on line 5" or something, but each step and the results need to be looked at. I think it unlikely you can get anyone with the ability to do so in this forum go through the steps at this time of year. Sorry. I could be wrong or may be over-complicating something where the rubbish can be stripped away and a quick answer can be had, but I don't think so.

I absolutely agree...and I am pretty darn certain he reported some money as income that absolutely was NOT income.