1099-C for Motorhome

[nwtaxlady]

Client received a 1099-C for a Motorhome. Here is what is on the 1099-C

1099-C date is 12/21/15

Box 2 amount of debt discharged is $35,068
Box 3 interest is blank
Box 4 just has the VIN number
Box 5 the box is checked personally liable
Box 6 Identifiable event code is H which is "Expiration of nonpayment testing period"
Box 7 Fair Market Value of property is blank

The Kelly Blue Book value of the motorhome FMV is about $32,000

The client does not have the motorhome it was taken. The client also is NOT insolvent.

How should this be reported?

[TaxprepP]

Since the 1099 states you were personally liable it sounds like recourse debt where the property was subject to the debt and the debt is in excess of the FMV. . Per IRS Pub 4681 pg.4 the lender's repossession of the property is treated as a sale of the property by you and may result in your realization of gain or loss. Sale of the property is a separate issue from cancellation of debt as ordinary income (the excess of the canceled debt over the FMV of the property).