Video Summary
What is a 1099-C? It’s an IRS form which is completed by a lender whenever they forgive debt of a borrower. Usually, a 1099-C is issued whenever you have a short sale, meaning that you sell the property for less than the amount of money owed. The difference, if the lender forgives it, is shown on the 1099-C, which is reported through the Internal Revenue Service as income. And if you receive a 1099-C, you need to contact a knowledgeable certified public accountant. You will not necessarily have to pay taxes, and you will be able to subtract your basis if it’s investment property from whatever gain the lender has reported under the 1099-C.
If it has to do with your primary residence, and you get a 1099-C, you may not have to pay any tax likewise, and as an individual you can exempt up to $250,000.00 of gain as far as the sale of your home if you’ve lived in the home for two out of the past five years. Also, if it was the original mortgage and you did a short sale there’s some federal legislation that may also excuse the issuance of a 1099-C. I would also add that many times on a short sale, the lenders don’t necessarily issue 1099-Cs. So if you do get a 1099-C, I suggest that you consult with a knowledgeable certified public accountant and ask them how much you’re going to have to pay or recognize as income.
And if you have any other questions about 1099-C, give me a call at 847-2288. Thank you.