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1099A vs 1099C

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    1099A vs 1099C

    Could someone explain the difference between these two. I understand that the 1099A is for abandoned or repo'ed property. But if the box is checked about personal liability, what has to be reported. It is my understanding that the 1099A is not a forgiveness of the debt. The financial institution has two years before they might forgive the debt. And that that forgiveness would br reported on the 1099C.

    Thanks for any input.
    You have the right to remain silent. Anything you say will be misquoted, then used against you.

    #2
    1099-A is for abandonment of business or investment property. If it is a personal item, such as a personal use car, no reporting is done. The 1099-A is filed by the lender when facts indicate the borrower intends to permanently discard the property. The 1099-A identifies the outstanding principal balance of the loan, the appraised value of the property if it is turned over to the lender to avoid foreclosure, and whether the borrower was personally liable for the debt. But the lender does not have to have forgiven the debt yet to file the 1099-A.

    An abandonment allows a taxpayer to write off the basis in property that he or she considers to be worthless. So I suppose the purpose of the 1099-A is to tell IRS, yes, this guy abandoned his business or investment property, so now he gets to write off the loss. But it also could warn IRS that there is a possible forgiveness of debt issue about to happen.

    As to the personal liability issue on the 1099-A, the taxpayer’s deductible loss would have to be adjusted for debt. In other words, you can’t write off the loss if basis is less than the liability you owe on it. So I suppose the other reason for having the 1099-A issued by the lender is to tattle on the borrower so that he does not write off an abandoned property where his loss has to be adjusted for the amount of debt attached to it.

    The 1099-C is generally a forgiveness of debt issue, telling IRS someone might have to pay tax on debt they walked away from and the lender decides to no longer pursue it. The instructions say you don’t need to file the 1099-A if in the same year the 1099-C is filed for the canceled debt.
    Last edited by Bees Knees; 08-22-2005, 07:32 AM.

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      #3
      Thanks for the reply.

      I have recently had two (new) clients filing prior year returns with 1099A's. They had gotten their income information from a transcript from the IRS because they had lost the originals.

      Both clients said the 1099A was in reference to their personal residence. So, I couldn't see that anything needed to be reported, since there actually wasn't any forgiveness of debt yet and they wouldnt be able to write off any loss.

      Is there any need to report anything from the 1099A in this scenario?
      You have the right to remain silent. Anything you say will be misquoted, then used against you.

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        #4
        Nothing to report unless you have an actual cancellation of debt issue, or you abandoned business or investment property. Otherwise, there is nothing to report on the tax return.

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          #5
          Thanks very much
          You have the right to remain silent. Anything you say will be misquoted, then used against you.

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