Reporting Form 1099-A & Form 1099-C


A few weeks ago, I did a blog post titled “You got a Form 1099-C. Now What?” We’re still getting questions on an almost daily basis over there. But it’s gotten a little buried and I want to make sure that information stays accessible. Please post your questions here - I’ll be moving them to this post if any come on the older one too.

Some of the things we’ve discussed: What is the difference between the Form 1099-A and Form 1099-C? The Form 1099-C report cancellation of debt. The Form 1099-A does not report the cancellation. This leads to the question of whether you should report debt forgiveness income from a Form 1099-A. Readers of the blog have reported that the IRS has told them they should and others have been told that they should not (also told by the IRS).

The Form 1099-A is used to report that property was received. Period. It does not say whether the debt was cancelled. If the debt is cancelled, then you get Form 1099-C. If you have property that is both foreclosed on and the debt is cancelled, you’ll get both Form 1099-A and Form 1099-C. If you only get Form 1099-A, that probably means the debt has not been cancelled. Look out. Depending on the state you’re in, the lender may have as long as 4 years to come after you for that debt.

The problem is that many lenders have been merged, bought or otherwise changed and the paperwork is a mess. Plus, the lenders don’t seem to have a good grasp of when to use the right form either.

So what if you don’t get the right form or they’ve used the wrong address to send it to you? One suggestion may be to go ahead and file anyway, assume you’ve gotten the cancellation and then either offset it with a loss in the property (hopefully) or be able to prove why you’re not liable for the tax by filing Form 982.

Got questions? Pleas ask them here.


Tags:

112 Comments so far:


On March 12th, 2010 | 4:45 pm
Marie Ackerman said:

I had an investment property in Scottsdale which was short saled in Oct 2009. The bank decided that they wanted to retain the right to come after us for the difference which they have. We did not receive any documentation for year-end accounting from the bank. The question is: should we have received something and if so, what? Also, how do we file taxes if we decide to to a Chapter 13 Bankruptcy for Tax year 2010? Thank you for any replies….


On March 12th, 2010 | 8:22 pm
Diane Kennedy said:

In this case, they are right - the Form 1099-A would have meant that they had foreclosed on the property. A Form 1099-C would have meant that they canceled the debt, which they didn’t do.

If you file bankruptcy, then I would guess they would give you a Form 1099-C. But even if you don’t receive one, include a Form 982 showing that any tax due to discharge of indebtedness would not be due. Bankruptcy is one of the exemptions that stop you from having to pay tax.

It’s an interesting set of circumstances. I’ve heard of a number of people who didn’t get Form 1099-Cs and I suspect that the lenders plan to come after the borrowers later. My guess is that we’re going to see an increasing number of bankruptcies when people get caught up in this.


On March 16th, 2010 | 6:49 pm
Wilma Cullen said:

My husband and I both received a 1099-C form for the same property. One in my name and one in his name showing the same amount on each form. Do we combine those two amounts or just use one of the forms for filing? I am not getting a return call from CitiMortgage on this issue.


On March 17th, 2010 | 10:18 am
Denise Wilgenbusch said:

Regarding Ms. Cullen’s question, we had the same issue with Citimortgage. Per Citimortgage, they are REQUIRED by the IRS to send a 1099-C to each person on the mortgage but use only ONE for taxes. Citimortgage quoted some IRS code. The person at Citimortgage who handles 1099’s is Michelle Parker or Judy Campbell. The number I have for them is 636-261-4461 or 636-261-4486. Hope this helps.


On March 17th, 2010 | 12:12 pm
Diane Kennedy said:

Thank you for the response Denise. I absolutely agree. You only need to report this once.


On March 18th, 2010 | 11:05 am
Dan Orr said:

I had an investment property that I short sold in the 3rd quarter of 2009. The lender agreed in writing that I would have no further obligation after successful close of the short sale. I haven’t received any documentation, 1099 A/C or otherwise, from them; only reported the property as sold on my return with the corresponding loss from the sold price. Should I be anticipating something, file something extra for the IRS or go ahead and file?


On March 18th, 2010 | 8:50 pm
Diane Kennedy said:

Dan, they should issue you a Form 1099-C. Call the lender and find out when/if it has been issued.

My concern is that you don’t file correctly and hear about it 2 years later. And now there are penalties and interest that have stacked up PLUS you need to come up with the tax, and might not have the cash laying around.


On March 28th, 2010 | 9:10 am
Paula Dahlke said:

My husband and I received a 1099-A, then a 1099-C for 2009. Are we just to file the 1099-C? There is no chapter 7 or 11 with this home, and it was our primary(only)residence. I am also confused when Turbo Tax says we are to claim it under Home Sales. How? This is the first year we have done our own taxes and I am begining to think Turbo Tax was a BAD idea for us to try. Please help!!


On March 28th, 2010 | 11:53 am
Diane Kennedy said:

Paula, the Form 1099-C means that you have Cancellation of Debt. You need to report that amount as income unless you qualify for an exemption. Chances are you will get an exemption for federal tax, but your state may not give you one. (Not all states adopted the same exclusion) You will need to file Form 982 with your return to get this exemption.

I’m not sure that Turbo Tax can help you with your return this year. You don’t want to get this wrong - otherwise, you’ll have to pay tax on that COD income. I suggest you go back to your old preparer one more time or find someone else to do it this year. But make sure they know what a Form 982 is and how to file it for you.


On April 5th, 2010 | 9:44 am
Joe said:

I apologize if this sounds redundant, but I received a 1099-A but no 1099-C for tax year 2009. It was for an investment property that was foreclosed. I understand that the bank may still come after me for deficiency, but how should I file the 1099-A for now? Some tax pros I talked to said I should call the bank and ask them if they intend to cancel the debt. If not, I can write off the loss as a Capital Gains Loss on a Schedule D since the foreclosure can be treated as a “disposal of property”. Any thoughts would be helpful.


On April 6th, 2010 | 10:10 pm
Brian said:

Received a 1099-A for an investment property that was foreclosed on in Jan 2009. Based on the Fair Market Value listed on the 1099-A, I would have just over a $180,000 loss. I will use this loss against any depreciation recapture, but cannot use it against debt forgiveness because I did not receive a 1099-C. Also filed Chapter 7 bankruptcy on December 16, 2009. The amount still owing to the bank will be discharged in my bankruptcy. Because of the bankruptcy discharge, the bank cannot send me a 1099-C form in the future or if they do, I can show the gov’t that this debt was discharged in Chapter 7 bankruptcy and is not eligible for debt forgiveness. Would you agree?


On April 7th, 2010 | 10:22 am
Diane Kennedy said:

Joe, the Form 1099-A does not show cancellation of debt. But it does give you enough information to file the loss on Schedule D. BTW, if the property was in service then it is a business property. That means it is NOT a capital loss and thus subject to the $3K/year limitation.

If the company later issues you a Form 1099-C, you will have COD income to deal with. If you are insolvent or file bankruptcy, you won’t have tax due on that.


On April 7th, 2010 | 10:27 am
Diane Kennedy said:

Brian, you have an interesting question here. If you use the bankruptcy exemption to avoid the tax on COD income (assuming they give you a Form 1099-C), then you need to adjust the basis on the property.

Let me step through this: Let’s say you buy a property with zero down for $300,000. It’s now worth $200,000. You get a discharge for $100,000 and you also have a loss for $100K. If you didn’t get the exemption, they would wash. But because the bankruptcy exempts the tax on the discharge, you have no tax due. This exempted amount reduces your basis in the property, so you don’t get a loss either.

In effect, this stops you from getting to take a loss and then later not having to pay tax on the COD income.

So…for now, I think I would report the sale on Schedule D, with the loss. Then once you know the status on the debt forgiveness, you may have to amend your 2009 return.


On April 15th, 2010 | 8:14 pm
John said:

I have two 1099-A forms for rental properties. The FMV and Outstanding Balance are the same amount. Does this mean that if/when I receive my 1099-C it will most likely be a COD of zero? And if I were to file the 1099-A form what would I do with it?


On April 16th, 2010 | 11:40 am
Brandon said:

We’ve received 1099-A for our rental property(residential) and we will soon foreclose our primary home this month as well.
We’ve moved out already back in February from the property. I heard that we don’t have to worry about the cancellation of the debt for the primary residence. But we are concerning about our investment property($180,000 deficiency)
Could we be able to file a bankruptcy AFTER we get 1099-C form or We have to file BK BEFORE we the form? Does it matter? Please help…

Thank you,


On April 16th, 2010 | 12:18 pm
Diane Kennedy said:

You probably do not have to pay federal tax on the debt cancellation for your primary residence. But you will need to file Form 982 with your tax return to claim that exemption. Additionally, you need to check to make sure your home state has the same provision.

For the investment property, you probably will have a loss to claim on Schedule D as well.

As far as when to claim bankruptcy, check with your bankruptcy attorney.


On April 22nd, 2010 | 3:52 pm
Susan said:

What if the Bank writes the debt off as a loss on thier books. How would one know? If the banks take the deduction on thier taxes how can the send a 1099 to the default borrower?


On April 22nd, 2010 | 4:18 pm
Diane Kennedy said:

Susan, in other words - who is watching the banks? Sadly, I’m not sure anyone is.

I’ve heard story after story of people trying to contact Bank of America regarding their Countrywide Mtge and B of A not having a clue.


On April 22nd, 2010 | 4:40 pm
Susan said:

My initial question was: What if the Bank writes the debt off as a loss on thier books. How would one know? If the banks take the deduction on thier taxes how can the send a 1099 to the default borrower?
Let me claify. If the bank (A local ma and pa bank) use the borrowers unpaid interest bank charges misc other default charges as a deduction to reduce thier tax liabilty, prior to accepting the short sale sholud I get the bank to produce a document that they will use the loss for thier benifit?


On April 23rd, 2010 | 9:38 am
Diane Kennedy said:

Susan, I’m still confused. Is it your concern that the bank doesn’t properly report their own financial statement and tax obligation? Or are you concerned that you won’t get debt forgiveness?

Maybe if you could provide some specifics for your particular circumstances that would help me answer your question.


On April 23rd, 2010 | 10:11 am
Susan said:

I am a Real Estate Broker in Illinois. I have a client who submitted a short sale contract to his mortgage holder (It’s an investment property). He is short $300,000. I understand the bank must issue a 1099C. What if does a Deed in Lieu (DIL) of foreclosure. (The bank did not start the foreclosure.) In the DIL agreement can the bank agree to not issue a 1099C?


On May 15th, 2010 | 10:40 am
Sam said:

Hello Diane,

We have land in North Carolina, where the value had decreased by 90%. We are planning on letting this investment go into Foreclosure due to my financial hardship.

Question for you, is North Carolina a state that will issue some flavor of 1099 ?

If they decide to issue a 1099, what are my options for minimizing or completely avoiding the tax due ?


On May 15th, 2010 | 2:01 pm
Diane Kennedy said:

Sam, 90% decrease is a huge hit! Yikes.

If you do a foreclosure or DIL, you should receive a Form 1099-A. That means they have taken back property for a debt.

It looks like NC IS a state that can get a deficiency judgment. That means that the lender may not forgive the debt and will instead pursue you for the loss. You can stop that process if they lender agrees to give you an estoppel, which they may be more likely to do if you voluntarly do a DIL.

Here is a reference I found for North Carolina law: http://www.foreclosure.com/statelaw_NC.html#6

Check out the statute and consult an attorney, though, to make sure the information is accurate and up to date

The Form 1099-C means cancellation of debt. If they cancel the debt, you have taxable income. If they don’t cancel the debt, they probably intend to sue you. There isn’t a good answer here really…


On May 15th, 2010 | 11:13 pm
Sam said:

Hi Diane,

Thanks for your prompt response.

What are my options for minimizing or completely avoiding taxable income on a 1099-C ?

I am sure many people are in a similar situation.


On May 16th, 2010 | 4:27 pm
Diane Kennedy said:

Sam, in the case of an investment property you probably will have a loss on the sale (ie, disposal). On thing to be careful of though, if you’ve never turned it into a rental, it’ll be a capital loss which can only offset capital gains or $3K/year against active income.

We’re going over that in great depth on the next coaching call for USTaxAid. http://www.USTaxAid.com/coaching


On June 14th, 2010 | 10:05 am
Patrick said:

I received a tax form 1099c cancellation of debt from a Bank in December 2009. We now have received a complaint and a statement of damages from the Bank attorney they are now looking to collect on the same cancelled debt. AS per the IRS a 1099c is to be only issued when the issuer is indeed cancelling a debt. I contacted the Bank to discuss this form and was referred to their legal counsel I contact the banks counsel May 19, 2010 and have not heard bank to the status of their complaint and the reason for the 1099c form that they issued. Were do i go from here. Thanks


On June 15th, 2010 | 9:06 pm
Leah said:

Hey Diane-

Seroiusly wanting to not love my accountant anymore. personally did chap 7 in 2009- included units of rental property as I signed personally as well- That was all discharged- fine- Could not meet the obligations to the bank for the rentals- no tenants etc etc- made a deal w/ the bank to take them back and give them 30K in rental monies. Agreement also stated they released my company - also said if they ever did dispose of them they MAY send me a 1099C - but I would have to see the books of all the income etc etc( they are continuing to run them as rentals and assuming they will not be selling them anytime soon.) So my accountant comes back with me like owing alot of $$ in taxes- she took that ( none existant no 1099 nothing+ went BK and discharged) sale as an equal to what I owed on the property and added that to my income. Owning that property even with my other part of my company making some money- the debt I had againist the FMV- I would never see the = signs again on.
SO my question is- does she have no clue what she is doing?? She is not correctly interpreting the ” insolvency ” tax code- which in my world says you owe a ton more than what they are worth-please correct me if I am wrong on that- this was discharged in the BK- but because it is rental property does it not count? and lastly- there is no 1099 of any kind and I doubt there ever will be.. so why would u tax me at the full boat of what was owed on them>> Please correct me if I am wrong on any of these issues- because I do not have a billion more dollars to pay them and from what I am gathering - I don’t owe it- PS it is a LLC Thanks so much !!! also- isn’t there also something about recourse or non resource notes?? The rental properties were originally done up as recourse mort/notes. The bank agreement set any liability aside - so what would be the correct avenue?? the original recourse??


On June 17th, 2010 | 4:25 pm
Diane Kennedy said:

Patrick, the Form 1099-C is indeed supposed to be issued only when there is cancellation of debt.

The bank goofed or there is some other charge they didn’t forgive. You may want to see an attorney, but by all means document everything you are doing. Send correspondence via return receipt or overnight so they have to sign for it.


On June 17th, 2010 | 4:30 pm
Diane Kennedy said:

Leah, there is something seriously wrong here.

First of all, even if you didn’t have the BK, most likely the loss on disposal of the properties would have equaled any debt forgiveness.

But, to be honest, I’m not even sure there was debt forgiveness. They took back the property in an agreement. Most likely that means they accepted the properties for the amount of the debt plus $30K (which is how much you kept for rent income, if I’m reading this right.)

So far, two reasons you wouldn’t have tax here - (1) it would offset if there was debt forgiveness and (2) sounds like according to the agreement there wasn’t even any debt forgiveness anyway.

Then finally, even if there was debt forgiveness, a BK will wipe out the tax due on that. You can’t take a loss on top of it, but it will wipe out any loss. Did your accountant file a Form 982 and follow the instructions? That’s where this is all discussed.

Drop my husband a note at Richard@USTaxAid.com and he can set up for a free review of your return. I’ll take a look at it and see if there is an easy fix.


On June 17th, 2010 | 4:32 pm
Diane Kennedy said:

Leah, correction - I can’t go back and correct my comment. In the next to last paragraph, I meant to say that you can’t take a loss on top of the forgiveness, but the Form 982 will wipe out any debt forgiveness tax issues.

Yes, it’s complicated, but this is the type of things we do for our clients.


On June 25th, 2010 | 4:13 am
Stephen Silvers said:

Hello Diane,
I owned a property jointly in Florida with my cousin. We both were on the mortgage and deed. We did a short sale. The bank sent me a 1099-c only in my name and ss#. What should I do??


On June 29th, 2010 | 2:46 pm
Diane Kennedy said:

Stephen, I’m assuming that this is an investment property.

You’ve got a couple of options. If there is an offsetting loss from the property, take the entire loss yourself on Form 4797 (reporting gain/sale from disposition of property).

Otherwise, you need to have the mortgage company revise the Form 1099-C, which I suspect you’ll have a hard time getting them to do. You could report only half and your cousin reports half, but I’d almost guarantee you’d get, at a minimum, a letter from the IRS about it.


On June 29th, 2010 | 3:03 pm
Steve Silvers said:

Diane,
We did not use the property for investment.This was more of a vacation home for each of us. I stayed there for 3-4 months and so did he.
Thank you


On July 20th, 2010 | 2:40 pm
Eddie said:

Diane,

First of all I have to tell you that your blog is by far the most helpful one that I have found.

My Question:
I am short-selling my rented investment property in Florida.

I purchased it for $216,000, the short-sale price is $74,000, and the amount of my 1099-C will be $98,000 ($172,000 owed less $74,000 from the short sale).

My question is how to avoid or minimize the tax implication of the 1099-C. From some of your prvious blogs I am assuming that since the proprty is and has been in service (rented) I can off-set the loss on disposal with the 1099-C. Is that correct? Is there an IRS publication that further explains this to me?

Thanks for you help… Eddie


On July 20th, 2010 | 4:28 pm
Leah said:

Hello question again for you- I have a SBA loan that they are supposedly taking a OIC on - 1. will they 1099 a/c me the difference? They have the building & equip(fyi) 2. will they still ruin your credit w. the reporting-
I know part maybe out of your realm but I can’t seem to find any info about these


On July 20th, 2010 | 5:33 pm
Diane Kennedy said:

Eddie: Thanks for your kind notes!

The Form 1099-C income gets reported on your Form 1040 as miscellaneous income. For info on that, take a look at the instructions for Form 1099-C.

The sale of the property is reported on Form 4797. So, if you purchased it for $216,000, and assuming you didn’t do a like kind exchange into it, we’ll say your basis is $216,000 plus improvements that you capitalized, less accumulated depreciation.

Just for the sake of the example, let’s say the basis is now $214,000. You are selling the property for $74,000. You have a loss reported on Form 4797 of $140,000. If you have any suspended losses from the property, you will now take those deductions too.

So in this case you have income of $98,000, but you also have a loss of $140,000. So, you end up not having any taxable gain.

Take a look at the instructions for Form 4797 to see how you report sales.


On July 20th, 2010 | 5:34 pm
Diane Kennedy said:

Leah, I don’t know how SBA is working on these deals but I do have clients who have been successful at negotiating with their bank to have the credit hit removed from their credit report. If the SBA is forgiving debt, there is no negotiation there, you’ve got COD income.

I’m guessing you have a business loss that will help offset this?


On July 22nd, 2010 | 12:36 am
Why Can’t I Find an LLC Tax Form? | USTaxAid Services said:

[...] Reporting Form 1099-A & Form 1099-C [...]


On July 31st, 2010 | 8:58 am
Eddie said:

Diane,

Thank you for your response on 7/20/2010.

Basically based on your response I will be able to deduct the loss as ‘ordinary’ (not a capital loss). Does that answer depend in any way as to whether or not I am a ‘real estate professional’ as defined by the IRS?

Thanks

Eddie


On August 7th, 2010 | 8:03 am
Roman said:

Diane,

My question is regarding a 1099-C for a rental property. A short sale was done on a rental property for $50,000. The loan amount outstanding was for $110,000. First of all is my 1099-C going to say $110,000 or $60,000? Do I also get a 1099-S (for the sale of $50,000)?

I believe I have to reduce my current basis which is $120,000 by the 1099-C amount (assuming that will be $110,000)giving me the adjusted basis of $10,000. So my final questions is (if I am correct thus far), do I now have to calculate a gain on ’sale’ by taking the $50,000 sale less my new adjusted basis of $10,000 (giving me a net ordinary gain of $40,000)?

Thanks


On August 9th, 2010 | 10:40 am
Diane Kennedy said:

Hi Roman,

We’ve got a new blog series on real estate starting on 8/10, would you mind posting your question there? I’m afraid it’s going to get buried in this older blog.

Thanks! Diane


On August 11th, 2010 | 9:23 am
Michelle said:

Hi, Diane -

While in Ch.7 in late 2008, our lender took our two investment properties out of the bankruptcy and then took them back as Deed-in-Lieu’s. We then received 1099-A’s for 2009. The amounts in the “Balance of principal outstanding” & “Fair Market value of the property” had the same amounts, resp., on both 1099s (although the FMV not nec. actually true, we did put large down payments on the properties). We did not receive a 1099-C. Did the way they reported on the 1099-A infer that they won’t send 1099-C’s? I don’t see how they could, but if they did eventually send 1099-C’s, would I still be able to deduct any debt cancellation with the bankruptcy exclusion (or the insolvency one)? And thus amend my 2009 return?

Thanks!


On August 12th, 2010 | 12:41 am
Form 1099-A & Form 1099-C Problems | USTaxAid Services said:

[...] Reporting Form 1099-A & Form 1099-C [...]


On August 13th, 2010 | 6:24 am
Raj said:

I had a short sale on my principal residence in 2009.I havnt filed my 2009 tax return yet. I received 1099-S and a 1099-C. Do I need to report both of these forms on my tax return or only the 1099-C. Thanks.


On August 19th, 2010 | 5:00 am
Patrick said:

I would not file the 1099c until I got a letter of confirmation from the bank that the 1099-c issued was sent out and not in error and it is indeed the banks intent to cancel the debt. That the bank will not pursue this debt in court etc.


On August 26th, 2010 | 11:17 am
Peggy said:

My question is, after the home forecloses and there is a deficiecy (i.e. 2nd mortgage not used for home improvements), and assuming the bank sends a 1099c, would we be able to file chapter 7 to remove the tax debt?

I understand that if we filed BK prior to foreclosure it is taxation is relieved, but what happens if we wait to see if the bank even bothers to pursue us, can we, at that time file BK?


On August 29th, 2010 | 9:56 am
Diane Kennedy said:

Peggy, this is something that you need to discuss with a bankruptcy attorney. Don’t assume anything regarding BK laws, they can be tricky when it comes to tax liens.


On September 20th, 2010 | 3:33 pm
Maria said:

My husband & I did a short sale on our home in the later part of 2009. We did receive a 1099-C and used Turbo Tax to file. We recall entering the 1099-C as misc income when prompted in Turbo Tax, however, we just reviewed our taxes today, and can’t seem to find the 1099-C figure that we entered. Our taxes were accepted and we received a refund. We were unaware of Form 982 until just recently. We are now facing a possible mortgage fraud suit from an investigative company. My husband said this is an honest mistake, but I’m really worried. Is it too late to submit a Form 982? If not, how do we do this? I’ve tried calling IRS but have been put on hold for countless times.


On September 20th, 2010 | 3:35 pm
Maria said:

My husband & I did a short sale on our home in the later part of 2009. We did receive a 1099-C and used Turbo Tax to file. We recall entering the 1099-C as misc income when prompted in Turbo Tax, however, we just reviewed our taxes today, and can’t seem to find the 1099-C figure that we entered. Our taxes were accepted and we received a refund. We were unaware of Form 982 until just recently. We are now facing a possible mortgage fraud suit from an investigative company. My husband said this is an honest mistake, but I’m really worried. Is it too late to submit a Form 982? If not, how do we do this? I’ve tried calling IRS but have been put on hold for countless times.


On September 22nd, 2010 | 8:19 am
Peggy said:

My house is in foreclosure, it has a first and second deed of trust. The property is scheduled to go to trustee sale in November. I’m anticipating, if it sells, that the first lien will be paid in full. However, there will be a deficiency (over $100k) on the 2nd.

Per our divorce decree my ex-husband is responsible to pay the 2nd mortgage (deed of trust). If there is a 1099c issued would we both be responsible or would the divorce decree have any weight?


On September 22nd, 2010 | 9:09 am
Diane Kennedy said:

Marla,

If you have a threatened lawsuit, you need to have a lawyer involved. Get your attorney to recommend an accountant to help you resolve this. It’s time to bring the professionals in.


On September 22nd, 2010 | 9:13 am
Diane Kennedy said:

Peggy,

Technically the Form 1099-C should probably go to your husband. That’s a question for your divorce attorney to verify.

The problem I see though is even if that’s what they’re supposed to do, it’s hard to say what the lender is going to do. Its hard to get them to do what should be easy and straightforward, let alone something a little outside the norm!

If they give you a Form 1099-C in error and your husband agrees that it should be his, then report it on your return with that note. If he doesn’t agree it’s his and doesn’t report it, you may have to get the courts involved.


On September 22nd, 2010 | 10:29 am
Peggy said:

My house is in foreclosure, it has a first and second deed of trust. The property is scheduled to go to trustee sale in November. I’m anticipating, if it sells, that the first lien will be paid in full. However, there will be a deficiency of over $100k on the 2nd.

My question is regarding insolvency. If the home is being appraised at $177k (that’s why I can’t refi) and I owe $225k, does that alone make me insolvent for tax purposes?

My car is worth about $4,000 (paid for), I have no other assets or bills.


On September 22nd, 2010 | 10:48 am
Maria said:

I jumped the gun (as usual). It’s wasn’t a law suit that was served, just information on another subject matter in regards to the sale of our home. So being that we are not in a law suit or anything, I’d like to ask the question again…. Is it too late to submit a Form 982? If it’s not, what steps should we take? We filed early April and I believe received our refund early May.


On September 29th, 2010 | 8:15 am
Kate said:

I have 1099-A question. My friend received 1099-a for his rental property. Bought condo for $ 120,000 in 2002 filed schedule E till 2008 . In 2009 received $7000.00 in rent and $1,200 for cash for keys and 1099-A. Box 2 balance principal outstanding is $ 116,500 box 4 FMV $60,000. Borrower is personally liable for repayment of debt. How do I use this information to calculate capital gain/loss on this investment?


On September 29th, 2010 | 5:23 pm
Maria said:

I jumped the gun (as usual). It’s wasn’t a law suit that was served, just information on another subject matter in regards to the sale of our home. So being that we are not in a law suit or anything, I’d like to ask the question again…. Is it too late to submit a Form 982? If it’s not, what steps should we take? We filed early April and I believe received our refund early May.


On October 3rd, 2010 | 6:43 pm
Diane Kennedy said:

Maria, you will need to file an amended return with the Form 982. You’ll want to do this because the IRS is otherwise going to be looking for COD income from the Form 1099-C.


On October 8th, 2010 | 12:44 pm
Tina said:

Question on Form 1099-A: Rental Property involved - Box 2 Balance of Debt is 249,840.35 and Box 4 FMV of property is $100.00 and borrower is personally liable for debt. Question 1 - Is $100 the sales price to report the sale on Form 4797 and Question 2 - Is there COD income currently or does COD income not occur until 1099-C is received cancelling the debt?


On October 9th, 2010 | 12:20 am
Form 1099-A, Form 1099-C and Other Tricky Tax Reporting on Dumping Bad Real Estate | USTaxAid Services said:

[...] Reporting Form 1099-A & Form 1099-C [...]


On October 11th, 2010 | 10:11 am
Diane Kennedy said:

Tina,

The $100 FMV (yikes) of the property is the sales price. That’s going to give you a big loss. Make sure you report it on Form 4797, not Schedule D, otherwise you could end up with limited losses.

On the COD, if you don’t have a Form 1099-C, then there is no cancellation of debt. Lenders are getting this wrong a lot of the time these days. But for now, do not report COD income.


On October 17th, 2010 | 12:18 am
Foreclosure Crisis and IRS Audits | USTaxAid Services said:

[...] Reporting Form 1099-A & Form 1099-C [...]


On October 19th, 2010 | 9:33 am
Marta said:

My question is this: what do you do if you include the amount of foreclosure that is stated on correspondence from the lender on (for example purposes only) 2009 return, but you receive the form from lender in 2010 and the amounts don’t match? Would you recommend to amend 2009 and include the correct amount or record the difference on 2010 return? Or leave it and don’t worry if the lender cannot verify which amount is correct?


On October 20th, 2010 | 7:08 am
Amy said:

I have a questions about the filing requirements of Form 1099-C. Here are the facts and the question: “AB Accounts” is a single member LLC of “AB Holdings, LLC”. “AB Accounts” is in the business of buying up credit card debt and then going after the individuals to collect the money. Let’s say that “AB Account” purchases my credit card debt balance for $50,000. They come after me and I negotiate and pay them $25,000 in satisfaction of the debt. Does the $25,000 need to be reported to me on a 1099-C or does “AB Accounts” fit into an exclusion where they don’t have a reporting requirement? I have talked to a few different IRS agents and have gotten 2 different answers. One agent told me the SMLLC does not have to file because it does not fit the “applicable entity” requirements listed in the instructions. The other agent told me they do have to file because it creates income that is taxale to the debtor, therefore imposes a duty on the creditor to file Form 1099-C. So I’m not sure if the original creditor is to file the 1099-C, or the SMLCC, or the holding company that “AB Accounts” is a SMLLC of?


On October 20th, 2010 | 1:22 pm
Diane Kennedy said:

Marta, not sure if this was a Form 1099-A or Form 1099-C. If a Form 1099-A was issued a year late and you had correspondence from the lender with different info, I’d go with the correspondence and contact the lender to remind them they had told you something a year before and their form is a year late anyway.

If it’s a Form 1099-C that was issued a year later, then go with that and amend. If you paid tax on the debt forgiveness in the year prior, chances are it really wasn’t forgiven debt until 2010. Technically, you should remove from 2009 and report in 2010 which is when the debt actually was cancelled.


On October 20th, 2010 | 1:24 pm
Diane Kennedy said:

Amy:

If you are asking this question on behalf of AB Holdings and/or AB Accounts, then I strongly recommend that you talk to your corporate CPA. They will have the facts that are needed to advise you in this regard.

If you have had debt forgiven and are told that you don’t have to pay tax on it, you’ll need to get more information on that. Generally debt forgiveness is a taxable event. The question is WHO is issuing the 1099-C for you, not whether you will get one. (At least that’s what I think from the facts here.)


On October 20th, 2010 | 1:27 pm
Marta said:

Thank you Diane for your help!


On December 8th, 2010 | 3:44 pm
Lance said:

I refinanced my home in 2007 and with the money i bought an income property.
I lost my job and my primary home went into foreclosure. I moved out of my primary residence and into my income property after a year i claimed Homestead exemption on my income property.
I wanted to do this to protect it under fl law in case i was sued for a deficiency.
My attorney got the securization co. to accept a waiver of deficiency in the consent to judgement order. Is the foreclosed property still considered my primary residence?


On December 10th, 2010 | 8:49 am
Diane Kennedy said:

Lance, I can answer the question from a tax perspective (your new home would be the primary residence), but I believe you need to know how Florida state law views it in regards to the asset protection. That would be a question for your attorney.


On January 17th, 2011 | 3:54 am
Rob said:

Hi Diane,

I received a 1099-A for a rental property that was my primary residence in May 2006 to Dec 2007 and then fully moved out in June 2008. I was not able to sell the house when I married in Dec 2007 so I started renting in Sept 2008. As for the 1099-A, Box 2 is smaller than Box 4 by about $600 and the mortgage was a non-recourse loan but box 5 was marked yes. Do I owe tax? Thanks.


On January 17th, 2011 | 1:53 pm
Diane Kennedy said:

Rob, at this point you just have a Form 1099-A which reports the foreclosure of a property. If you don’t get a Form 1099-C, you won’t have cancellation of debt income to worry about.

You may have a deductible loss on the property, though. Talk to your tax preparer about that - you’ll need to know rental income, expenses and your basis on the property.


On January 20th, 2011 | 6:22 am
Etoi said:

I rvcd a 1099-a in the mail and not sure what to do with it box 2 is 196915.10 and box 4 is 222,384.40 and the home sold for 177,907.00 what do I do with this form not sure my home was loss do to unemployment and now I’m not sure what to do.


On January 22nd, 2011 | 1:22 pm
Diane Kennedy said:

Etoi,

You didn’t say whether this was your principal residence, 2nd home or an investment property. I’m assuming it’s your principal residence. If that is the case, you dont’ need to report anything Most likely you will not receive a Form 1099-C. If you do, you will need to report it. If you have an exemption from the Cancellation of Debt income tax, you’ll need to also file a Form 982.


On January 25th, 2011 | 5:32 pm
anthony said:

Diane,
My primary residence foreclosed in April of 2010. I was divorced in Feb of 2009. Our decree did not cover the responsibility of losses/gains from the primary residence. If I receive the 1099 only in my name is my ex responsible for half of the COD? I am going to claim insolvency and file 982 and the worksheet in 4681 for insolvency.


On January 26th, 2011 | 8:27 am
Diane Kennedy said:

Anthony,

That is a great question. I think you need to talk to the lawyer who handled the divorce in this case. It’s going to depend on how state law handles this. My guess (recognize that it’s a guess and this is NOT my area of expertise) is that if you were awarded the primary residence in the divorce, then it will be solely yours. This could change if you’re in a community property state, so that’s the part that I’m uncertain about.


On January 26th, 2011 | 8:29 am
Diane Kennedy said:

ANNOUNCEMENT: We’ve had many questions about Form 1099-A and Form 1099-C. Lenders aren’t playing by the rules and that makes it even harder.

So to help, we’re doing a FREE NO HYPE teleseminar on February 5 (Sat) at 9 am PST. Sign up at http://www.DianesSeminars.com


On January 27th, 2011 | 10:49 am
anthony said:

Diane,

Update: I live in AZ and I received the 1099A & C in my name along with my ex’s name on the forms as well. When filing out my 982 form do I only need to account for half of the amount shown on the 1099-C since my ex should be responsible for the other half? it was not specifically addressed in our decree (we filed ourselves) but we are a community property state.

thanks once again!


On January 27th, 2011 | 12:39 pm
Diane Kennedy said:

Anthony, there is going to be only one SS # on the Form 1099-C and that’s the one the IRS is going to be checking.

I think you’ve got to go back to your divorce decree and the property settlement. If you were awarded the house, then the COD income is all yours. If it was shared, then split it. If the decree was silent, talk to an attorney.

The safest bet is to just take all the income yourself. If you try to just take part, and your ex protests, you could end up in a big tax mess.

If you take it and qualify for an exemption due to principal residence, insolvency or bankruptcy, use Form 982 to report the reason why you get an exemption.


On January 27th, 2011 | 3:42 pm
gilbert said:

Hi Dianne,

I live in Arizona and was foreclosed in Oct. 2010. I had an 80/20 mortgage on it. I just called the bank and was told that they have sent me a 1099-a for the first mortgage and sent


On January 27th, 2011 | 3:51 pm
gilbert said:

Hi Dianne,

I live in Arizona and was foreclosed on Oct. 2010. I had an 80/20 mortgage on it. I just called the bank and was told that they have sent me a 1099-A for the first mortgage and sent the 2nd mortgage to another department. The person who answered me said that they’re not sure if I would get a 1099-C and said that Fannie Mae is our lender and that the bank is just servicing the loan. Do I file the the 1099-A this year or wiat for the 1099-C. If the 1099-C would come after 2013 which is the year the debt forgiveness act ends, will I be taxed by the IRS? and what happens to my second mortgage. My first mortgage is a purchase mortgage. MY second I refinanced it from the same bank but did not get any extra money. I just lowered the interest. Please help.


On January 30th, 2011 | 10:00 am
Diane Kennedy said:

Gilbert, the one thing you didn’t say was whether this was your primary residence or it was an investment property. If it’s your primary residence, then you won’t need to report anything. If it’s an investment, then you will need to report the disposal of the property.


On January 30th, 2011 | 1:55 pm
ms hardy said:

I have a cancellation of debt form for a vehicle repossession for the amount of 11,185.93 from 2006. How will this affect my taxes being that I only made 9,000 in 2010. Does this mean that all of my refund will be taken? How do they determine if I will be responsible for any of that amount. My debt that I owe like my home loan, and personal loans is well over the amount that I made in 2010 and the 11, 185.93 in debt from the vehicle


On January 31st, 2011 | 10:52 am
Diane Kennedy said:

Ms Hardy,

The COD income reported on Form 1099-C does need to be reported. And yes, you’re right that’s going to kick up your income. You may be able to qualify for the ‘insolvency’ exception for Form 982. Unfortunately, this is a tricky form to complete and you probably will need to hire someone to help you. Bad news - you have to pay someone. Good news - you probably won’t owe tax on that income as a result.

Insolvency means that you owe more than you own.


On January 31st, 2011 | 1:00 pm
sharon said:

Hi Diane,

I bought a house in 2005 while living in AZ. I had to relocate out of state about a year later due to a job change. I wasn’t able to sell the house so I rented it to help cover the mortgage. After renting for 3 years and losing my job, I decided to short sell. I got several offers but the bank sat on it for 9 months until it foreclosed in June. I just got a 1099-A from them. The 1099-A states that I am personally liable for the loan. Also, the FMV is $25000 less than the short sale offer that they didn’t act on. Since AZ is an anti-deficiency state, am I liable for the default? How should this be filed on my taxes?


On February 1st, 2011 | 10:51 am
Diane Kennedy said:

Sharon,

Reading your story just makes me shake my head. What are these lenders thinking?

First of all, the Form 1099-A does not mean you have any tax due. The Form 1099-C is the one that has cancellation of debt and that may or may not mean tax due.

It sounds like this was your primary residence and assuming there was only a 1st mortgage and you didn’t do a cash-out refinance, you probably won’t be liable for any deficiency. And likewise even if you get a Form 1099-C and it’s your primary residence, you also won’t have tax.

But that doesn’t mean that the lender won’t try to pursue a claim against you. Or even hit you with COD income and then try to puruse a claim against you. We’re seeing some outrageous things by the lenders these days.

If it looks like it’s headed that way, definitely get an AZ attorney involved.


On February 1st, 2011 | 3:56 pm
Lance said:

After two years in the foreclosure process( Florida), My attorney worked out a consent to judgement agreement with waiver of deficiency, which means i allow the bank to foreclose and they agree not to sue me for any deficiency.
I asked my attorney about a 1099, He said they may or may not send me a 1099. He’s had clients who haven’t received 1099’s from some institutions and haven’t sent them to the IRS. In some of the securitization processes Banks would believe incur penalties for write offs, when they’ve already claimed a write off for bad mortgages. I’m not saying i shouldn’t receive one, i’m saying there’s a reason a bank or securitization company would not claim one and show the debt as met, or paid.
Do have any info on this?


On February 1st, 2011 | 3:58 pm
Diane Kennedy said:

Lance, interesting point. I HAVE heard about this with B of A/Countrywide loans in California.

If that’s true for you, you will have a bit of a silver lining.


On February 1st, 2011 | 4:09 pm
Myrna said:

Hi Diane,

I’m so confused. Last year my husband received a 1099-C for tax year 2009 for the difference of the short sale on his property that he sold in tax year 2009. He filed a Form 982. Yesterday, he received another 1099-C for the same property for tax year 2010 and for the entire outstanding loan amount. Is this right? Could it be an error on the creditor’s part? Why would he be getting another 1099-C? What should he do?


On February 1st, 2011 | 8:37 pm
gilbert said:

hi dianne,

It was my primary residence. I’m really interested on when I might receive a 1099c. And if I do get a 1099c after 2012 which is when the debt forgiveness act ends, will the IRS still tax me even though the foreclosure occurred in 2010? and what’s going to happen to my 2nd mortgage?
Note: 1st mortgage was 180k and 2nd mortgage was 50k.

Thanks again.


On February 1st, 2011 | 9:50 pm
anthony said:

Hello Dianne,

My gf received a 1099A but no 1099C. Her house foreclosed on 03/10 and sold for 235k however when she received the 1099A it showed that the outstanding/principal balance was 305k (box2) and the FMV shows 329k (box4). so does this mean she will not receive a 1099C? And why would the bank claim the FMV at 329K when it was actually and still is 235k? that confused us? Is the bank trying not to show a loss?

Thanks alot!


On February 2nd, 2011 | 12:50 am
Diane Kennedy said:

Gilbert,

It’s absolutely impossible to predict if you’ll get a Form 1099-C or when you will. If you read back on some of the blog comments I’ve gotten on this subject (search Form 1099-C), you’ll see comments from people who’ve gotten Form 1099-Cs 3+ years later, people who’ve gotten Form 1099-Cs and then had the lender sue them for the ‘foregiven debt’ and lenders who have said they would forgive the debt and not issue Form 1099-C because they received bail-out money to cover bad debt.

We also don’t know what Congress will do with the law, although I would guess that they would extend the debt forgiveness beyond 2012.

On the 2nd - again, we don’t know what the lender would do, but if it is not ‘acquisition indebtedness’ it could be considered taxable.

Meanwhile, if you can, don’t worry about it until something happens. The lenders are all over the place and it’s impossible to predict what might happen. You can drive yourself worrying because there are too many variables.


On February 2nd, 2011 | 12:51 am
Diane Kennedy said:

Anthony,

I’ve heard recently of banks inflating the FMV on the Form 1099-A. I don’t understand why they are doing this unless it means they get some extra payment from the bail-out money that is covering bad loans. In other words, they get more of the money. Like you said, it doesn’t make any sense.

At this point, your GF doesn’t have a Form 1099-C, so there is nothing you need to report. If/when she gets one, there could be something you need to do.


On February 2nd, 2011 | 12:52 am
Diane Kennedy said:

REMINDER: I have a FREE Teleseminar “You Just Got a Form 1099-A (or Form 1099-C) - Now What?” Saturday, February 5th at 9 am PST, Noon EST.

Sign up at http://www.DianesSeminars.com.


On February 2nd, 2011 | 11:46 am
Diane Kennedy said:

Myrna, contact the lender. They obviously have a problem with their accounting records. If they do not/will not change the 2010 Form 1099-C, you’ll need to file a statement with your return stating what you’ve told me here.


On February 2nd, 2011 | 2:30 pm
Lance said:

This kind of covers it all http://www.irs.gov/individuals/article/0,,id=179414,00.html

As for why some lenders donot send a 1099c Especially those involved in securitization which is why were having so many foreclosures with Banks who have apparently lost the note and can’t find it.
http://foreclosureblues.wordpress.com/2010/08/31/securitization-and-remic-tax-implications/


On February 2nd, 2011 | 5:42 pm
Harry said:

Hi Diane:

Our scenario:
We had Florida second home > Payment problems > Lender file Les Pendens > Property was sold in a short sale > Lender filed Satisfaction of Mortgage with the court > we received a 1099-C.

Q – are we still liable for a DF?


On February 3rd, 2011 | 6:28 pm
Don said:

Here is my question, say debt was canceled in 2007 but you don’t get a 1099C until 2010. Does the 1099 C “income” apply to the actual year it was canceled (2007) or for the year you get the 1099C (2010)?

Don


On February 4th, 2011 | 8:41 am
Barb said:

Diane,

For both of these, I’d like to understand my tax liability. Thanks in advance for your help.

I have 2 1099 -C’s.
1)The bank on their own reduced the principal balance of my loan to move me off of a negative amortization loan. The 1099-C amount is 69K. I still have the property. It is an investment property.

2) The 2nd 1099-C was an investment lot that I sold and the bank allowed for a settlement. I sold at a loss and the 1099-C is $118K.

Can you please share my tax liability in each scenario. Thanks so much.


On February 5th, 2011 | 2:50 am
Diane Kennedy said:

Barb says: “For both of these, I’d like to understand my tax liability. Thanks in advance for your help.

I have 2 1099 -C’s.
1)The bank on their own reduced the principal balance of my loan to move me off of a negative amortization loan. The 1099-C amount is 69K. I still have the property. It is an investment property.

2) The 2nd 1099-C was an investment lot that I sold and the bank allowed for a settlement. I sold at a loss and the 1099-C is $118K.”

In the case of (1), you’ve got a loan modification. Since you didn’t have a disposal of the property, you don’t have any offsetting loss.

If you are insolvent or declare bankruptcy, you won’t have to pay tax. You do have to reduce the basis in the property.

For (2), it sounds like you have COD income but likely have a similar or higher amount of loss on disposal of the property.

The only concern I have is with (2) that you may have a capital loss, which means $3,000 per year as a write-off, but you have ordinary income of $118,000.

By all means, talk to a tax pro on your case. There likely is a way to avoid the tax hit, but you need to be strategic.


On February 5th, 2011 | 2:57 am
Diane Kennedy said:

Don says: “Here is my question, say debt was canceled in 2007 but you don’t get a 1099C until 2010. Does the 1099 C “income” apply to the actual year it was canceled (2007) or for the year you get the 1099C (2010)?”

Don, if you have Form 1099-C issued for 2010, then you’ll need to report it in 2010. Interesting that it took so long for them to do the form. Makes you wonder if they were expecting to come after you for the liability.


On February 6th, 2011 | 8:04 am
Laura said:

Hi Diane…I agree with the person who said your site is extremely helpful, there are so many conflicting answers re: the 1099-A and 1099-C forms.

My question is regarding a foreclosure in Georgia. We were building the house to live in but that never happened so it wasn’t our primary residence. It was foreclosed on 2/10 and sold (REO) on 4/10.

We just received a 1099-A and it has the FMV higher than the loan. Also, higher than what sold for. In GA there is a 30 day statute after the sale to file for deficiency judgment, which the bank didn’t do. Therefore I’m not sure why we wouldn’t get a 1099-C. We called the bank and they said they weren’t sending one.

As I was researching (which is making my head spin from all the conflicting stuff) I found something re: reasons you would get the 1099-C, part of it is expiration of statute, but then it goes on to say….Expiration of the statute of limitations is an identifiable event only when a debtor’s affirmative statute of limitations defense is upheld in a final judgment or decision of a court and the appeal period has expired.

Now I’m totally confused, does this mean we need to file something with the court? Or is the reason we wouldn’t get a 1099-C is so even if the bank can’t sue they can send to collections?

I know I threw a lot at you, and I’m asking many questions but I am desperate to get an answer. I have called numerous lawyers in GA and they don’t have any answers for me.

Thank you for your help.


On February 6th, 2011 | 5:05 pm
Diane Kennedy said:

Laura says: My question is regarding a foreclosure in Georgia. We were building the house to live in but that never happened so it wasn’t our primary residence. It was foreclosed on 2/10 and sold (REO) on 4/10.

We just received a 1099-A and it has the FMV higher than the loan. Also, higher than what sold for. In GA there is a 30 day statute after the sale to file for deficiency judgment, which the bank didn’t do. Therefore I’m not sure why we wouldn’t get a 1099-C. We called the bank and they said they weren’t sending one.

I know I threw a lot at you, and I’m asking many questions but I am desperate to get an answer. I have called numerous lawyers in GA and they don’t have any answers for me.”

There are a few reasons why you might not have gotten a Form 1099-C: (1) They still intend to come after you for the difference (based on other info you had, probably unlikely) (2) Their paperwork is so messed up they don’t know what they are supposed to do (3) They are one of the banks who received fed money for bail-out/foreclosures and feel there is a problem forgiving a debt for which the govt repaid for you. (4) Some other reason I can’t think of…

Based on what you’ve said, I have a feeling that you might be falling into (4) above. We’re hearing more and more cases of this. Banks received money to help with the foreclosure crisis and they are taking the position that since they received money, they don’t have debt to forgive. And since they aren’t forgiving debt, they are not issuing a Form 1099-C.

This will be considered a capital loss property, if you were to report it. That means that your loss would be limited to $3K per year, in excess of any capital gains.

So not reporting the Form 1099-C is a good thing for you.

But you may still have loss in excess of the debt on the property. I would report the property on Schedule D, showing your basis (what you paid + improvement costs) then show as sales price the loan amount from Form 1099-A. The IRS tells us that we can use the Form 1099-A loan amount or FMV, whichever is less.

If you later get a Form 1099-C, then you will need to go back to amend the Schedule D sales amount to reflect a different sales price.


On February 9th, 2011 | 8:06 am
Lisa said:

My question… I foreclosed on my primary residence in Dec. According to public record Fannie Mae purchased the loan from the bank..I owed 258,000 and they purchased it for 285,000 I am assuming they paid for any interest and lawyers fees. I just recieved a 1099a from Fannie Mae showing FMV as 285,000 and amt of debt 258,000 and yes checked in box 5. Does that mean Fannie Mae will try to collect from me in the future and do I still file the 1099a on my taxes?? If public record documents this as a sale to Fannie Mae then am I still responsible for the debt.. I have not received a 1099c


On February 9th, 2011 | 10:46 am
Su Chen said:

Hi Diane,

I have a few question for you. I received a 1099A with a principal balance of 393k. Fair market value at 200k. It was a second home, I rented it out in January 2010. Foreclosed on July 2010

I called the bank and asked if they will be sending out a 1099c. They claimed they mailed out all tax documents the last week of January. But they couldn’t say if the 1099c was one of those documents. I put in a request for a new 1099c to be sent to me..

I asked if they could give me figures on what the property sold for. They told me to contact the attorney’s office that handled the foreclosure.

I just finish calling the attorney’s office that foreclosed on the property for the bank.

I was told on July 2010 the last bid (sold on the court house steps) was 426,439.79 and that the property went back to the bank.

My question to you is if the bank has the bid price high and it goes back to them what number should I work off of with the 1099C?

I have an appointment to do taxes on Friday. I don’t know if I should report the 1099A, should I take a guestimate of what I think taxes should be? Should I use the number they had it at the court house steps?

I did check on zillow and it shows the house sold in Nov 2010 for 170k. So if i go off what I owed and back out the 170k. I’m thinking the 1099c should show 222,469.97..

Can I write this off on a Schedule D? Do I add the amount that I paid for the property which is 453k + improvements cost?

The rent I did collect was much less then the monthly mortgage payment. Does that factor in some how? Thanks for your help….


On February 13th, 2011 | 1:45 pm
Marta said:

I have a questions regarding forclosure of rental and lawyer fees. Can those be deducted as expense on Sch E, lowering the amount of debt that was foclosed, or do they have to be amortized, or can’t be deducted at all? Thank you.


On February 13th, 2011 | 2:06 pm
Diane Kennedy said:

Su Chen,

Best bet is to wait to see what the lender sends you. If you guess and file your return, then later get forms that don’t agree, you’re going to have to amend your return. That will cost additional time and money.

Besides the question of the amount that it sold for, you need to know if the debt was forgiven. The Form 1099-C is your best bet for finding that out if the lender can’t tell you.


On February 13th, 2011 | 2:10 pm
Diane Kennedy said:

Lisa, it sounds like the FMV is higher then the debt. ($285K FMV and $258 debt) You didn’t say that the FMV is wrong, so I’m assuming it’s right. If that’s the case, then there would be no debt to forgive and no Form 1099-C.


On February 13th, 2011 | 2:13 pm
Marta said:

Diane,
In regards to your above coment: what if I’ve contacted the lender company and they said they will not be sending out 1099-C? I’ve only rec’d 1099A… Is there a time limit on when the lender has to issue a 1099-C?
In regards to forclosure of a rental property: would you agree it’d be better to file the sale of the property it in a current tax year based of 1099-A and not risking possible gains in later years?
When contacted, the bank said “No 1099-Cs” will be issued… Does it sound like they have NO clue what they’re doing? Very frustrating…


On February 15th, 2011 | 5:51 pm
CP said:

I bought a property with my sister as a coborrower. It was our primary residence up until we did short sale on the property last year. We received a 1099-C with both our names on it but only her ssn. How should we report this on form 982? Should my sister claim all of it, should we split it or should we both claim all of it on our individual tax returns? We also received two 1099-C since we had second mortgage (80/20 loan not refinance).

Thank you for your help!


On February 16th, 2011 | 11:37 am
Diane Kennedy said:

CP says: “I bought a property with my sister as a coborrower. It was our primary residence up until we did short sale on the property last year. We received a 1099-C with both our names on it but only her ssn. How should we report this on form 982? Should my sister claim all of it, should we split it or should we both claim all of it on our individual tax returns? We also received two 1099-C since we had second mortgage (80/20 loan not refinance).”

For sure your sister needs to do something with this information because it’s got her SSN on it. If it’s her primary residence and she’s been filing as such, she should just file the Form 982 for the 1st loan. It sounds like the second loan is also acquisition indebtedness and thus qualifies. So it would go on the Form 982 too.


On February 16th, 2011 | 5:41 pm
Deborah said:

I live in Ohio which is a recourse state. In 2009, the home where myself and my ex-husband had lived before our divorce was foreclosed on. With the assistance of an attorney, we were able to get the mortgage company (CitiMortgage) to agree not to pursue us for any deficiency judgment after the foreclosure action was completed. We have this in writing and is documented by court records. The case was finalized in November 2009. The mortgage company did not request sale of the property from the court until 2010, and the Sheriff’s auction of the property occurred in April 2010 and it sold for $84,000 before fees/taxes/other payments were taken out. We had owed approximately $156,000. In addition, we had an FHA insured loan, so I’m sure CitiMortgage was reimbursed for the entire amount of the loan through Freddie Mac.

I’d expected to receive 1099-A and 1099-C because of all of this, but not being listed as the first person on the mortgage they might be sent to my ex who lives in Texas. I have waited to file my taxes because I figured I’d have to file Form 982, but I don’t have any of the necessary information. It is extremely likely we qualify for the exemption, so I’m not concerned about having to pay any tax liability on this debt. I am just trying to figure out what I need to do so I can do the right thing. I am ready to file my 2010 taxes and would like to proceed to do so. I am stressed about this situation and don’t to have any problems with the IRS. Making it through the foreclosure was stressful enough!


On February 21st, 2011 | 4:06 pm
Diane Kennedy said:

Deborah,

If you don’t know if you are getting a Form 1099-A and/or Form 1099-C, call the lender. Be prepared to be persistent - you will likely get transferred, hung up on, who knows what. But keep asking the question. If they aren’t giving you a Form 1099-A or C, you have nothing further to report. But if they did give it to you and sent it perhaps to the wrong address, as you suspect, that could be an IRS issue down the road.


On February 24th, 2011 | 1:01 pm
Megan Hughes said:

Got questions on a Form 1099-A or Form 1099-C? We can help! For a limited time, Tax Survival for 1099-A and 1099-C Recipients is on special for just 19.95.
This info-packed audio and manual is comprised of 60 minutes of audio instruction on Form 1099-A, Form 1099-C and Form 982. You’ll also receive a 65
page eBook with full information on all these forms and over 65 true life case-studies. Get your copy today!