Discussion:Quick question- 1099c not received--What to do??

From TaxAlmanac, A Free Online Resource for Tax Professionals
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.

From TaxAlmanac

Jump to: navigation, search

Discussion Forum Index --> Basic Tax Questions --> Quick question- 1099c not received--What to do??


Discussion Forum Index --> Tax Questions --> Quick question- 1099c not received--What to do??

Lalva (talk|edits) said:

22 May 2010
Hello Almanacers,

Just a quick question about what to do in this case. I know that there are a bunch of questions regarding 1099c, cancellation of debt and the like, and I have read them (yes Kevin!) but I am still unsure about what to do.

Client lost home in short sale in California. There were two loans, the fist was non-recourse, and no 1099C will be issued. The second one was refi-ed, so is a recourse loan. My clients are calling the bank asking for the 1099c form, with no luck so far.

I filed an extension for them, but we want to wrap it up, so should I just file it with the sale in sch D (non deductible loss), and then deal with the COD income the year they receive the 1009c? Or do I have to deal with the COD in 2009, the year that they lost their home.

I just don't want to assume that the bank canceled the debt, because maybe they didn't send the forms because they haven't canceled it.

Thank you!

Kevinh5 (talk|edits) said:

22 May 2010
you deal with the COD income in the year the debt is cancelled. If they haven't received a 1099-C, the lendor may not have cancelled the debt yet. Especially if the client has assets the lender thinks they can get.....

DaveFogel (talk|edits) said:

22 May 2010
I agree with what Kevinh5 says. There are a couple of sources that I recommend checking. First, I suggest that you get a wage and income transcript from IRS eServices to see if the lender filed the Form 1099-C with the IRS. Sometimes, the lender files the form with the IRS but the borrower doesn't receive it. Second, does the year-end mortgage statement or Form 1098 from the holder of the second mortgage show a principal balance owed as of 12/31/09? This would be good evidence of whether the debt was, or was not, canceled.

Lalva (talk|edits) said:

22 May 2010
Thank you both for the suggestions. For the e-services, if I am not a CPA, or EA yet, will they send me the info?

R2 (talk|edits) said:

22 May 2010
Lalva, ask your client if the lender agreed to waive its rights to recover the deficiency. Perhaps, the lender merely agreed to defer the liability to a later date.

Lalva (talk|edits) said:

23 May 2010
OK, there is a letter from a collection agency saying that if they paid $26,000 ($99K debt) by a certain date, they would consider the debt paid in full, and that deadline was met. So it looks to me like there should be COD.

But my client is calling Citi (the second mortgage holder), and the collection agency, since she is not sure which should issue the 1099C, without any luck.

I am uneasy about including the 1099c info without the actual form, since it can come later, a different year, and then what?

I think that I am going to file the return showing the sale of the home, using the first mortgage (non-recourse) as realized amount. And we will have to deal with the COD income if we get the 1099c. And the tricky part would be how to split the basis. In one of the posts Dave Fogel recommended using the basis against the first mortgage, and show $0 basis in the second, since it was absorbed already in full. I think that in this case this makes a lot of sense.

Please tell me if I am in the right track.

THANK YOU!

DaveFogel (talk|edits) said:

23 May 2010
If you have evidence that the debt was canceled, i.e. that $73,000 of the debt was canceled when the taxpayer paid the $26,000 according to the terms of the letter, then you must report the COD income in the year that this transaction occurred regardless of whether a Form 1099-C has been received.

Lalva (talk|edits) said:

23 May 2010
OK, I'll do that.

Thank you all!

  • Adding search terms: 1099-A, no 1099-C.

To join in on this discussion, you must first log in.
Personal tools