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I received a 1099c from a mortgage lender not sure how to…

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I received a 1099c...

I received a 1099c from a mortgage lender not sure how to handle

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

The house was foreclosed on 2 years prior to this form

Submitted: 6 months ago.Category: Tax
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12/9/2017
Tax Professional: Tax.appeal.168, Tax Accountant replied 6 months ago
Tax.appeal.168
Tax.appeal.168, Tax Accountant
Category: Tax
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Hello. Happy Holidays!! Thank you for choosing this Q&A service for assistance. My name is***** am reading over your inquiry and will prep my response shortly.

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Customer reply replied 6 months ago
Thanks
Tax Professional: Tax.appeal.168, Tax Accountant replied 6 months ago

It is not uncommon to receive a Form 1099-C a year, two years, or more after a debt has been charged off. Unless you meet an exception to exclude the cancelled debt amount from your income, it is taxable income. Note that the IRS receives a copy of the 1099-C as well, so you have to report it. Listed below are the exceptions that allow taxpayers to exclude the cancelled debt amount as income.

-----------------------------------------------

EXCEPTIONS to Cancellation of Debt Income:

  1. Amounts canceled as gifts, bequests, devises, or inheritances
  2. Certain qualified student loans canceled under the loan provisions that the loans would be canceled if you work for a certain period of time in certain professions for a broad class of employers
  3. Amounts of canceled debt that would be deductible if you, as a cash basis taxpayer, paid it
  4. A qualified purchase price reduction given by the seller of property to the buyer
  5. Any Pay-for-Performance Success Payments that reduce the principal balance of your home mortgage under the Home Affordable Modification Program

Amounts that meet the requirements for any of the following exclusions aren't included in income, even though they're cancellation of debt income.

EXCLUSIONS from Gross Income:

  1. Debt canceled in a Title 11 bankruptcy case
  2. Debt canceled during insolvency
  3. Cancellation of qualified farm indebtedness
  4. Cancellation of qualified real property business indebtedness
  5. Cancellation of qualified principal residence indebtedness

REFERENCE SOURCE:

https://www.irs.gov/taxtopics/tc431

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Customer reply replied 6 months ago
What would I have to do for insolvency?
Customer reply replied 6 months ago
or #5
Tax Professional: Tax.appeal.168, Tax Accountant replied 6 months ago

Now, if you meet an exception of exclusion, you would complete the Form 982 (Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment).

Again, if you do not meet an exception or exclusion the amount shown on the 1099-C is taxable income to you.

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Tax Professional: Tax.appeal.168, Tax Accountant replied 6 months ago

Link to Form 982:

https://www.irs.gov/pub/irs-pdf/f982.pdf

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Customer reply replied 6 months ago
is this the same for #5
Tax Professional: Tax.appeal.168, Tax Accountant replied 6 months ago

Yes, it is. Yo would use the Form 982 for either of the exceptions or exclusions.

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Customer reply replied 6 months ago
ty
Tax Professional: Tax.appeal.168, Tax Accountant replied 6 months ago

You are very welcome. Please remember to positively rate my response (3 or more stars) so that I can receive credit for assisting you. Thank you in advance.

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