Discussion:1099-C Line 3 advice

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Discussion Forum Index --> Advanced Tax Questions --> 1099-C Line 3 advice


Discussion Forum Index --> Tax Questions --> 1099-C Line 3 advice

EZTAX (talk|edits) said:

15 August 2010
I have been trying to get a bank to issue a corrected 1099-C but they keep saying my understanding of the situation is wrong.

Negative amortization loan. Original loan 425K. Bank is saying the principal balance was 468K before it was cancelled. I said no problem but the difference (43K) should be shown in box 3 of the 1099-C. They are saying this is not interest but rather "principal" that is being added. The 1099-C they issued shows no interest in box 3 even though the COD calculations include the negative amortization interest added back to the loan.

Who is correct? Thanks.

Harry Boscoe (talk|edits) said:

15 August 2010
In my quite limited experience, when a bank adds unpaid interest to the balance of a loan they often *think* that makes the unpaid interest into principal for tax purposes which we all know is ...

DaveFogel (talk|edits) said:

15 August 2010
I think you are correct. See Rev. Rul. 77-135, 1977-1 C.B. 133 regarding an FHA graduated payment mortgage, which is a form of a negative amortization loan.

Cotopop (talk|edits) said:

16 August 2010
Your opinion is supported by the instructions for completing form 1099 C where it states "include unpaid principal on the Original debt"

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