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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12036
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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My client bought a boat with a two million dollar loan for

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My client bought a boat with a two million dollar loan for commercial purpose. Boat is foreclosed. His S-Corp that was on Title gets a 1099A for the 1.1 million resulting from the foreclosure and his other S corporation also gets a 1099A that guaranteed the loan also gets a 1.1 million 1099A. If I file his K1s that way is he not hit twice with the same gain?

Lane :

Yes, they should have only filed one 1099. They're not forgiving 2.2mil., they're only forgiving 1.1mil.

Lane :

I would ask the lender for a corrected 1099A that changes one of the 1099s to zero

Lane and other Tax Specialists are ready to help you
Thanks for the rating Andy.

In the event the try not to correct, ...

YOu should let them know that the lender may have to pay a penalty for failing to report the correct amount of income on Form 1099-MISC. The penalty is $15 per incorrect 1099 if the corrected 1099 is filed within 30 days of the original deadline for filing Forms 1099 and 1096 with the IRS. The penalty rises to $30 per incorrect 1099 if the correction is filed by after 30 days but before August 1, and $50 per incorrect 1099 if the correction is filed after August 1. The IRS will waive the penalty if the corporation can show reasonable cause. For more information, see the Instructions for Forms 1099, Failure To File Correct Information Returns by the Due Date. The IRS also provides instructions on how to file corrected 1099 forms.


Hope this helps

Lane
Customer: replied 3 years ago.

Yeah this is a tough one. The IRS instructions said that a Guarantor is not a "debtor" in the reporting for1099C sense. 1099A are not directly related to the loan so I was not clear as a Guarantor of the loan how the S Corporation that guaranteed the loan but was not on title to the asset foreclosed would be hit with a 1099A.


Yep,

... just VERY misguided on the lender's part.

Regardless of who the debtor is, there is only one.

Sounds almost like their right hand doesn't know what the left hand is doing.

OR this is a collection tactic ... but again, if so VERY misguided.

(They're running afoul of the requirement that their information reports be accurate).

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