1099A

[jujube]

Could someone explain the difference between a 1099A and a 1099C? Thanks

[mwcpa]

a form 1099-C reports to you (and the IRS) the amount of a debt that is forgiven. Under Internal Revenue Code Section 108, a canceled debt is taxable income, unless specifically excluded.

"A debt is deemed canceled on the date an identifiable event occurs or, if earlier, the date of the actual discharge if you choose to file Form 1099-C for the year of cancellation. "

a form 1099-A reports to you (and the IRS) the fact that certain secured property was "foreclosed."

"File Form 1099-A, Acquisition or Abandonment of Secured Property, for each borrower if you lend money in connection with your trade or business and, in full or partial satisfaction of the debt, you acquire an interest in property that is security for the debt, or you have reason to know that the property has been abandoned. You need not be in the business of lending money to be subject to this reporting requirement"

In simple English..... with an example....
you own property subject to a secured debt.
the debt is 1,000.
the FMV of the property is 400
you abandon the property on 7-1-x1
the lender eventually canceled the debt on 2-1-x2
the lender would give you a 1099-A in x1 reporting that the property was "abandoned" with a value of 400. That would be, in effect, a sale or exchange. This may or may not be a taxable transaction.
the lender then would issue a 1099C in x2 reporting a debt cancellation of 600. That is taxable income subject to IRC 108 exclusions.

If the foreclosure and debt cancellation occur in the same year then more than likely only a 1099-C would be issued showing both parts of the transaction, the deemed sale and the debt cancellation.

This can get confusing and it is best to consult a qualified local professional tax adviser.

the quoted text is from the instrucitons to 1099-A and C found at IRS.gov

[jujube]

Thanks MWCPA..Do you know if a lender can pursue this debt? My CPA can't seem to give me a straight answer...thanks

[mwcpa]

the ability for a lender to pursue you is a legal question, not a tax or accounting one... your CPA, while probably well versed, is probably not an attorney, nor am I... you need to have attorney review your contract with the bank...

the issue comes down to one question... is the loan "recource" or "non-recource".... recource means you are on the hook for every penny.... non-recource means you are generally not, related to that debt.