1099-C Fact or Fiction

Real Estate Agent with Young Realty Group, Inc. BK3055753

So the borrower is told by some fast talking loss mitigation company that "we can get the lender to not send you out a 1099-c for the remaining balance written off" or "if the lender does not send the 1099-c you don't have to report it to the IRS".  HELLO, if the short sale property, foreclosure or Deed in Lieu property does not qualify for the Mortgage Debt Forgiveness Act i.e. investment property in most cases, you still have to report forgiven debt EVEN if you do not receive a 1099-c.  Look at it this way:  The IRS considers; right or wrong, forgiven debt as income.  If you go work part time and make $20,000 from your friend and your friend does not report the $20,000 to the IRS do you still have taxable income?  YES.  

Read the IRS rules on Forgiven Debt.  Read about IRS form 982.  Ask your accountant.  Do your own investigation into what really happens with your situation.  Hire a Realtor and one CDPE trained.  

Comments (3)

michelangelo vasco
mvp realty inc. - Manhattan, NY

My thought is FICTION / don't mess with the IRS (this could be their new slogan)

Sep 04, 2009 03:38 AM
Edward & Celia Maddox
The Celtic Connection Realty - Queen Creek, AZ

Good article.  Buyers need to be knowledgeable.  Most are in too big a hurry to dump the home.

Sep 04, 2009 03:45 AM
Dorie Dillard Austin TX
Coldwell Banker Realty ~ 512.750.6899 - Austin, TX
NW Austin ~ Canyon Creek and Spicewood/Balcones

Hi Lori,

Good points. Most people are so anxious to get out from under the house and relieved of the debt they forget about the IRS. You are right..don't make that mistake or you will know what it is like to be under the gun!

Sep 04, 2009 03:49 AM