If you can't get a corrected item, do a Sch C and "wash it
out" as the IRS will send you a letter in about 18 months
requesting SE and income tax on that amount. I have a
company that continues to issue 1099 misc with rent (box 1)
shown in box 7 ( non-employee). Have received IRS letter in
the past so I just do a Sch C netting it to zero and Sch E
where it is to be reported.

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Form 1099 misc. Box 7 is not the correct form. This form is
for someone who *works* for someone and is not considered an
employee. From the info, my opinion is that there should
have been *no* form sent to your wife. It sounds like
inheritance to me and that is not income and subject to
income tax.

Missy Doyle

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Fearless wrote:

- quote -

If it's your law firm that sent you the 1099, call 'em up
and ask 'em real nice to correct it. If it's the purchasers
of the house that sent it to you, they're sore losers, and
you should just ignore the 1099. Don't even try to report
what's shown on the 1099; by your description, it's not
taxable, no how, no way.

Oh, don't forget to report the interest; it looks like it
would be taxable. The expenses look like they're misc item
deds on Schedule A.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

Oh, don't forget to report the interest; it looks like it
would be taxable. The expenses look like they're misc item
deds on Schedule A.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

Oh, don't forget to report the interest; it looks like it
would be taxable. The expenses look like they're misc item
deds on Schedule A.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

Fearless wrote:

- quote -

If it's your law firm that sent you the 1099, call 'em up
and ask 'em real nice to correct it. If it's the purchasers
of the house that sent it to you, they're sore losers, and
you should just ignore the 1099. Don't even try to report
what's shown on the 1099; by your description, it's not
taxable, no how, no way.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

feldesmanm[at]gmail.com (Fearless) posted:

- quote -

You nailed it, with the last question. Contact the lawyer,
and request the payment be reported on a 1099-B "Proceeds
from Sale" (for that's what it was, the sale of an asset) --
where you can properly report it on Schedule D, showing an
offsetting cost basis (which would include the legal
charges) -- and presumably zero out the sum -- or better
yet, reflect whatever net loss was incurred from the
process, for a small deduction vs. other income.

Bill

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Sorry for the complexity of the problem, but I'm not certain
where to begin.

My wife received a 1099-MISC with Box 7 (non employee
compensation) listed at $17000. This amount represented her
1/4 share of the proceeds from a real estate loan made by
her father's estate to a buyer of her father's home. Both
the value of the house and the original $70,000 note were
part of the estate for which all taxes (federal and state
plus state inheritance) were paid at the time the estate
closed and was distributed in late 1998. Upon closing the
estate and paying taxes, the installment note was then
transferred to my wife and her sibs, who had been collecting
payments and reporting interest (and paying taxes on the
interest) since early 1999. In late 2004, the buyers of the
house started "forgetting" to pay on the loan and got
hopelessly behind. We engaged our family lawyer (a real
estate specialist) to initiate foreclosure procedings on the
property, with the intent of taking the house back if
necessary. It didn't come to that and our debtors instead
decided to pay off the balance of the loan and our legal
expenses. Since our lawyer's large firm handled all this,
the final payment was made to the lawyer's trust account,
from which all outstanding legal fees were deducted and then
distributed to my wife and her 3 sibs.

So my question is this. The $17000 does not represent
income to my wife; it is simply the proceeds of an
installment loan (plus accrued interest, less legal
expenses) on which income taxes have already been paid (in
tax year 1998). Where would one put the expenses that
would offset and neutralize this 1099-MISC on a tax form.
I'm given two options: Schedule C or Schedule F, neither of
which seem appropriate to me. I understand Schedule C and
*know* it's not the right place; Schedule F covers Farms and
doesn't apply.

Two questions: Where would the correct offsetting form be?

Or: Should the lawyer be sending a form different from a
1099-MISC

Thanks for your help.

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