1099-C on Second Mortgage

[taxjungle]

My client received a 1099-C (cancellation of debt). It was received for a 2nd Mortgage that he had CO-SIGNED for his brother's Principle Main home. My client has never lived in this home. It is marked as a Recourse Loan. The FMV was more than the Box 2 amount of cancelled debt.

What information do I need to receive from this client?
Will I need the Original Loan amount that he co-signed for?
Anything else?

I would really appreciate some feedback to help me to think this through.

[MilTaxEA]

His brother should also have received a 1099-C. Have the brother use Form 982 to exclude the debt and include a statement on your client's return stating that the income is attributed to his brother. I would include the 1099-C on Line 21 and step it out (place a negative amount on the next line) with the attached statement explaining the issue.

Read SCA 1998-039 for a good cite:

When the IRS receives Forms 1099-C reporting cancellation of indebtedness for each person with joint and several liability on an indebtedness, the IRS should not treat the full amount of the indebtedness cancelled as income to each separate taxpayer. Instead, a determination should be made as to the appropriate amount of discharged debt allocable to each taxpayer that is jointly and severally liable, taking into account all the facts and circumstances.

[dan doshan]

I am not sure of things here but .... this is a second mortgage which may complicate matters a bit. May depend on what the details of the 2nd were. Also not sure why the brother that co-signed would be relieved of any responsibility here. After all, he is equally responsible for the debt isn't he. He did cosign for.