Respuesta :
Answer:
C.
The gain or loss, and any bad debt is reported.
Explanation:
If you repossesse a personal property, then you may have a gain or loss, or bad debt. How to figure out the gain or loss and the basis in the repossessed property will depend on whether the original sale was reported as an installment sale or the entire gain was reported in the year of the sale, even though the buyer was paying on the installment method. Payments include not only actual payments but also payments treated as being received. Payments are treated as being received if the buyer assumes or pays any debts or expenses of the seller.
Moreover for you to better understand how gain or loss is calculated when repossessing personal property, you need to remember how gain or loss calculated on the sale of property, which is equal to the sale price minus your tax basis in the property. On a repossession, the sale price is the fair market value (FMV) of the repossessed property and your basis in the property is equal to a portion of your original basis, which is calculated differently depending on whether the entire gain was reported in the year the sale or the gain was reported over the years under the installment method.
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Answer:
The correct answer is letter "C": The gain or loss, and any bad debt is reported.
Explanation:
A repossession or foreclosure is the act by which a lender recovers a property from a lender due to non-payment or abandonment. The repossession is treated as a sale thus gains and losses must be reported but not debt since the recovery of the property is taken as the collateral. When the lender obtains the legal repossession of the property, the repossession must be reported to the Internal Revenue Service (IRS) using a Form 1099-C, Cancellation of Debt.
