Discussion:1099-C - Foreclosure

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Discussion Forum Index --> Advanced Tax Questions --> 1099-C - Foreclosure


Discussion Forum Index --> Tax Questions --> 1099-C - Foreclosure

Brentrj (talk|edits) said:

2 April 2011
Client receives a 1099-C (corrected) with a box 2 amount of $95k, box 3 "0", box 5 marked "no" that he is not personally liable, and this is not a bankruptsy. Box 7, fmv has a "0".

This client had actually only consigned on a supplemental mortgage. I have been reading conflicting opinions on how to properly report this on a tax return so as not to solicit a letter from the IRS requiring him to include COD income.

Any pros have any experience with this sort of issue and could offer me reporting suggestions?

Thanks much, Brent

Solomon (talk|edits) said:

2 April 2011
Search Dave Fogel - he has answered about every combination and permutation there exists on this topic.

DaveFogel (talk|edits) said:

2 April 2011
As you will find after reading numerous discussions on this board involving canceled debt transactions, you need to provide much more factual data than just "client receives 1099-C" and "client had actually only consigned on a supplemental mortgage."

Brentrj (talk|edits) said:

2 April 2011
The client's recently deceased spouse actually co-signed on a mortgage for a son and daughter in law. The son and daughter divorced and the daughter in law lost her job as a broker and thus the forclosure.

I am told that there was a legal suit (forged signatures-overstated wages on forms)against the mortgage company, but as of recent,been informed that they lost the case. My feeling is that since the consigner (spouse of client) is now deceased, they have no one to testify. I'm only speculating at this point, but I'm thinking that the supplemental mortgage was a deposit.

What other information might be helpful?

DaveFogel (talk|edits) said:

3 April 2011
Okay, you've provided a few more bits and pieces -- we know there was a foreclosure. What I gather from what you've provided is that the client's spouse co-signed on a mortgage for a son and daughter-in-law, and the lender subsequently foreclosed, took the property, and canceled the remaining $95,000 debt.

Questions:

  • Was the debt recourse or nonrecourse?
  • Who is reporting the disposition of the property?
  • Did the son and daughter-in-law also receive a Form 1099-C?
  • Have you looked at CCA 200023001, which addresses cancellation of debt income (COD income) in the case of joint obligors?

If the son and daughter-in-law are reporting the COD income pursuant to CCA 200023001, and if your client isn't, then you might want to disclose this fact on a statement attached to your client's return.

Brentrj (talk|edits) said:

4 April 2011
Thanks Dave,I appreciate your help.

My client's deceased spouse originally received a 1099C with his social security number on it. The first one had box 5 checked in a manner that indicated that he was personally liable. A "corrected" 1099C was recently received and box 5 is checked that he is not personally liable. I just noticed right now (shame on me) that the Debtor's identification is no longer the deceased spouses'. It may be one of the childrens'. I'm trying to confirm this now. Is there any reason with this new information that this should be reported or noted on this year's tax return? Thanks again for your help,

DaveFogel (talk|edits) said:

5 April 2011
What would you normally do with a "corrected" Form 1099?

Brentrj (talk|edits) said:

5 April 2011
I'm not referencing the corrected 1099, I'm asking about the new found fact that the social security no longer is the deceased spouses'. After questioning the client, they have no clue as to

whom it belongs. The number is also 10 digits. I've suggested to them to contact the creditor that issued the 1099-C for clarification.

Brentrj (talk|edits) said:

6 April 2011
Further; I am told now that ONLY the deceased spouse received a 1099-C and the Debtor's ID on the corrected 1099-C is an account number.

Therefore no one else is reporting the COD. Suggestions on reporting? Thanks

DaveFogel (talk|edits) said:

6 April 2011
How about answering the rest of my questions?

Brentrj (talk|edits) said:

13 April 2011
Dave,

-Recourse -Son and daughter did not receive 1099-C's

and are therefore not reporting disposition. (I am told)

-FMV on 1099-C is $0.

Further, I am told that this was a big legal battle between the borrower and the lender and the co-signer lost and I'm told that my deceased client is now the only one on the agreement.?? This is just crazy and I'm just trying to help this client out pro bono.

Any suggestions?

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