1099-C - cancellation of debt

[oceanlovin'ea]

Client brought in a 1099C for cancellation of debt for a credit card.....less than $2000.
Box 2 - amount cancelled
Box 3 - blank - not interest
box 4 - debt description - Visa card
Box 5 - Was borrower personally liable for repayment of the debt? "No" is checked.
not bankruptcy

Box 5 is confusing me. If client is not liable it is non-recourse. Am I right?

In printout I have from IRS PodCast it says "When non=recourse loans are cancelled, no COD income arises, so long as the lender takes back the property." There was no property to take back.

So is this taxable or not?

Linda, EA

[appelman]

Seems weird to me!

Never heard of a non-recourse credit card debt. I'll bet it's a mistake. How to treat it is another question.

[oceanlovin'ea]

disregard box 5?

Should I just disregard box 5?

I figured the return with the 1099 C included in income so they would know the worst case scenario. But if there is an exception that applies I do want to do the best for my client.

First 1099-C I have had in a couple of years.

Linda, EA

[jimmcg]

Client brought in a 1099C for cancellation of debt for a credit card.....less than $2000.
Box 2 - amount cancelled
Box 3 - blank - not interest
box 4 - debt description - Visa card
Box 5 - Was borrower personally liable for repayment of the debt? "No" is checked.
not bankruptcy

Box 5 is confusing me. If client is not liable it is non-recourse. Am I right?

In printout I have from IRS PodCast it says "When non=recourse loans are cancelled, no COD income arises, so long as the lender takes back the property." There was no property to take back.

So is this taxable or not?

Linda, EA

By most state's code that I am familiar with credit card debt is recourse to debtor.

[Burke]

Who issued the 1099? May have a contact phone number on it. If issued by the bank that handles the credit card, I believe it is taxable income. Box 5 checked in error, IMO. Hard to believe the bank would write it off unless it was bankruptcy.

[appelman]

Hard to believe, but banks do seem to do it.

The only exclusions would be insolvency or bankruptcy.

[oceanlovin'ea]

Not bankruptcy

They haven't filed bankruptcy.

The 1099-C is from Portfolio Recovery Associates. There is a phone number on it.

They might have been insolvent. Owe more on house and second mortgage than house is worth. Owes about $160,000 on house and houses are selling on his street for $90,000.
Have 2 cars probably. Have 3 kids and only husband works.

Linda, EA