1099-C question

[nwtaxlady]

Client had a rental house and couldn't keep up with payments. He had a 1st and 2nd mortgage on it. A few years ago we discussed how to get out of his situation. Since it wasn't not his personal residence for quite some time, it had been a rental for a number of years. So he filed bankruptcy and listed the house in the bankruptcy. He got the 1095-A in 2013. In 2015 he received a 1099-C for the 2nd Mortgage and in box #6 it is a F which means "by agreement". So I told the client that he needed to contact Chase for a corrected 1099-C for code A for Bankruptcy. Chase told him NO, not changing it because they forgave the loan BEFORE the bankruptcy was discharged. He filed Chapter 13. In his bankruptcy papers is a Mortgage Proof of Claim Listing Chase as the Creditor and the balance owed.

So now what?

HEELLLLPPP Pleeease!!!

[TaxGuyBill]

Does the date in box 1 of the 1099-C show it was discharged before the bankruptcy discharge?

If it happened before the bankruptcy discharge, there is a good change the taxpayer is insolvent, so that would be the easiest route to go.

https://www.irs.gov/pub/irs-pdf/p4681.pdf#page=8

Otherwise, the client may want to contact the bankruptcy attorney for clarification.

[nwtaxlady]

Not insolvent to the full extent....

We looked an insolvency, however, They are only insolvent by $7600 and the 1099-C is for $62,000.

[WhiteOleander]

We looked an insolvency, however, They are only insolvent by $7600 and the 1099-C is for $62,000.

Remember, the insolvency is figured by the date before the 1099C was issued. So, be sure you include the 62000.00 in the insolvency calculations.

[nwtaxlady]

Yes it is in the

Yes, the $62,000 is included in the total liabilities.