1099 A Or C

[BOB W]

I have a situation involving forgiveness of debt. Here is the problem:

Son borrowed $10,000 from financing company and mother co-signed. Son defaulted on payments. Son made agreement with finance co to pay $6,000 and the rest of the debt will be forgiven.

Upon getting a letter from the finance company verifying the satisfaction if the $6,000 is paid, both the Son and the Mother's name are on the letter. The 1099C will show both SS #s.

1- Can only the son claim the Forgiveness of Debt? His Debts exceed his Assets. His Mother on the other hand has many Assets and little debt.

2- How will the IRS look at this if the mother does not show the 1099?

3- If she shows the 1099 but reduces it by a like amount to get to zero, will this fly?

4- Can the Mother just show half and the Son the other half?

Thanks in advance.................Bob W

[taxea]

1099 A or C

Bob
Since the 1099 shows both SSN's, these are your options

Either party can take the total, or whatever percentage of the total they agree on.
I would strongly suggest that whatever is decided that an agreement in writing, signed by both parties, be place in both of their tax files and that a statement explaining how the 1099 was handled on the tax return be attached to the return when filing.
If the returns are not being electronically filed the agreement should be attached to support the statement of the handling of the 1099 income.
taxea, Hawaii

[BOB W]

1099

Thank you for your comments. My concern was that the IRS will go after the higher incomes. The son will be showing little or no income for 2005, except the 1099.