Short Sale Potential 1099-C Scenario

[rfk]

Hypothetical:

According to a RE broker, most lenders are willing to forgive debt for Qualified Personal Residence in a Short Sale. Therefore, one would presume no 1099-C? Does anyone know what reality is with regard to whether the lending institution will not issue a 1099-C if the mortgage is forgiven? Not sure what happens in the scheme of things when bank says we have forgiven your debt based on the circumstances. I know that a 1099-S will probably issued however.

Thanks for your comments.

rfk

[rfk]

An additional thought about the post

Also, what if person took out cash of the equity? So bottom line is, even if no 1099-C was issued, would a taxpayer still be required to report any debt forgiven.

In summary, we have the cash out situation and unknown whether bank will issue a 1099-C based on forgiveness of debt.

rfk

[solomon]

The lender should issue a 1099-C. Only acquisition debt will be excluded using a 982. In addition, the 1099-C will contain information pertinent for the sale reporting.