How to Calculate Investment Loss on a 1099-A

by Michael Dreiser

Internal Revenue Service Form 1099-A, Acquisition or Abandonment of Secured Property, is filed by lenders who have claimed abandoned property as full or partial satisfaction of debt. The form indicates the fair market value of the property, which is recognizable as income.

1. Identify the fair market value of the property from box 4 of Form 1099-A. This amount is the gross proceeds, or income, recognizable from the abandonment of the property.

2. Deduct from the fair market of the property the basis of the abandoned property. Although basis is typically equal to the original basis of the property, this may differ if the property was inherited, or if acquired pursuant to a like-kind exchange allowed under Section 1031 of the Internal Revenue Code.

3. Deduct from the value obtained in Step 2 the cost of any improvements that were not previously deducted as expenses of the property.

4. Deduct from the value obtained in Step 3 any costs included in the abandonment of the property. These can include legal and accounting fees incurred in making the decision to abandon the property. The IRS considers these to be costs of the property's disposition.

5. Add back to the value obtained in Step 4 any depreciation previously claimed on the property or related improvements. Previous depreciation deductions reduce the amount of your loss. The value obtained here is the investment loss on the property.

About the Author

Michael Dreiser started writing professionally in 2010. He is a certified public accountant with experience working for a large New York City accountancy and expertise in areas ranging from private equity taxation to investment management. He holds a Master of Business Administration in international finance from l’École Nationale des Ponts et Chaussées in Paris.

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