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Form 1099-A Box 4 and Box 5: Fair Market Value, Liability

Updated November 7, 2026. Quick answer: Box 4 of Form 1099-A is the fair market value of the property (for a foreclosure sale, generally the sale proceeds) and box 5 is checked if you were personally liable for the debt. Together they drive the result: with a recourse debt, canceled debt above the property value can be ordinary income; with a nonrecourse debt, the full debt is treated as the amount you realized and there is no canceled-debt income.

What the borrower’s copy says

“Box 4. Shows the fair market value of the property. If the amount in box 4 is less than the amount in box 2, and your debt is canceled, you may have cancellation of debt income.” “Box 5. Shows whether you were personally liable for repayment of the debt when the debt was created or, if modified, when it was last modified.”

How the lender fills in box 4

“For a foreclosure, execution, or similar sale, enter the FMV of the property.” The lender is told how to find it: “In the absence of clear and convincing evidence to the contrary, the FMV is considered to be the proceeds of the sale.” For an abandonment or a voluntary transfer in lieu of foreclosure the lender enters the appraised value only when box 5 is checked; “Otherwise, make no entry in this box.”

Why box 5 matters: recourse and nonrecourse

Publication 544 explains the two cases. For a debt you are not personally liable for: “If you are not personally liable for repaying the debt (nonrecourse debt) secured by the transferred property, the amount you realize includes the full debt canceled by the transfer.” For a debt you are liable for, the amount realized is the smaller of the debt and the property value, and “You are treated as receiving ordinary income from the canceled debt for the part of the debt that is more than the FMV.”

The same car, both ways

Publication 544’s own car example uses a debt of $10,000, a value of $9,000 when repossessed and an adjusted basis of $15,000. Recomputed from those printed inputs: if the loan is nonrecourse, the amount realized is $10,000 and the loss is 15,000 minus 10,000, or $5,000. If it is recourse, the amount realized is the smaller of $10,000 and $9,000, which is $9,000, the loss is 15,000 minus 9,000, or $6,000, and the ordinary income from canceled debt is 10,000 minus 9,000, or $1,000. The source describes each loss as nondeductible. The line-by-line version of this arithmetic is on the foreclosure worksheet page.

Loan typeAmount realizedLoss on the carCanceled-debt income
Nonrecourse$10,000$5,000 lossnone
Recourse$9,000$6,000 loss$1,000

What to do with the result

If the debt was canceled and the lender had to file Form 1099-C, box 5 and box 4 may appear there instead: “However, if the lender also cancels part of your debt and must file Form 1099-C, the lender may include the information about the foreclosure or repossession on that form instead of on Form 1099-A and send you Form 1099-C only.” Canceled-debt income can be excluded in some cases, reported on Form 982. See the overview of all six boxes for the rest of the form.

Edition

This page reads Form 1099-C and Form 1099-A (both Rev. April 2025), the Instructions for Forms 1099-A and 1099-C (Rev. April 2025) and Publication 4681 for 2025 returns, all files irs.gov served on November 7, 2026 (sha256 in the kit data). Check the revision printed on your own form before you follow a box reference, and the IRS page for the form for anything enacted after these files were published. Publication 544 (2025) is the second source for the recourse and nonrecourse rules.

Common mistakes

  • Ignoring box 5. Whether the debt was recourse changes the amount realized and decides whether there is canceled-debt income.
  • Assuming box 4 is an appraisal. For a foreclosure sale the instructions default to the sale proceeds.
  • Counting a loss on a personal car or home as a deduction. The source describes the loss on personal-use property as nondeductible.

Related: Publication 544, and home sale taxable gain worksheet.

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Sources

Read from the IRS documents linked above on November 7, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.

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