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I have an LLC business. I got a 1099-C cancellation of debt…

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I have an LLC business...
I have an LLC business. I got a 1099-C cancellation of debt for a line of credit i had for the business. However, I had signed personnally as well. I got a second 1099-c made out to me personally for the same loan and amount. How do I deal with getting 2 of these. I can't believe I have to pay taxes on double the amount?
Submitted: 2 years ago.Category: Tax
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Answered in 7 minutes by:
2/24/2016
Tax Professional: Lev, Tax Advisor replied 2 years ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 33,383
Experience: Taxes, Immigration, Labor Relations
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First of all I want to ensure you - there will not be double taxation.

However - we still need to reflect that information of the tax return.

The first question - how your LLC is treated for tax purposes?
Is that a sole proprietorship? or it is a partnership or a corporation?

Second issue - if the box 5 checked - means if you are personally liable?

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Customer reply replied 2 years ago
It is a corporation but yes I signed personally so box 5 is checked
Customer reply replied 2 years ago
I have to leave my computer in a few minutes...I will check your reply later.
Tax Professional: Lev, Tax Advisor replied 2 years ago

Please see instructions

https://www.irs.gov/pub/irs-pdf/i1099ac.pdf

Multiple Debtors -- For debts of $10,000 or more incurred after 1994 that involve debtors who are jointly and severally liable for the debt, you must report the entire amount of the canceled debt on each debtor's Form 1099-C. Multiple debtors are jointly and severally liable for a debt if there is no clear and convincing evidence to the contrary. If it can be shown that joint and several liability does not exist, a Form 1099-C is required for each debtor for whom you canceled a debt of $600 or more.

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Tax Professional: Lev, Tax Advisor replied 2 years ago

How to treat that situation - see here page 4 -

https://www.irs.gov/pub/irs-pdf/p4681.pdf

Persons who each receive a Form 1099-C​ showing the full amount of debt. If you and another person were jointly and severally liable for a canceled debt, each of you may get a Form 1099-C showing the entire amount of the canceled debt. However, you may not have to report that entire amount as income. The amount, if any, you must report depends on all the facts and circumstances,...

So if based on circumstances - that is a debt of teh corporation - it will be reported on the corporation tax return.

On your individual tax return - you do not report that amount - but will need to attach a note with explanation of facts and reasoning.

That will satisfy reporting requirements.

.

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