Did you get a Form 1099-C or Form 1099-A after you’ve renegotiated debt or had a foreclosure, deed-in-lieu of or short sale? Don’t ignore it! It means you owe taxes, but there could be a way out.
o What if you get a Form 1099-A or Form 1099-C for your personal residence
o What if you get a Form 1099-C for credit card debt
o What if you get a Form 1099-A or Form 1099-C for a second home
o What if you get a Form 1099-A or Form 1099-C for an investment property
o What if you get a Form 1099-A or Form 1099-C for a rental property
You’ll probably want to review Publication 4681, available online from irs.gov or from our office, Diamond Tax Consultants.
If the loans were qualified mortgage indebtedness, (which means you haven’t refinanced and pulled out other cash & you lived in the homes for 2 of the previous 5 years) then most likely you will NOT have tax due on this cancellation of debt (COD).
For others, not all states adopted the 2007 Act that gives the exclusion on COD income for principal residences. The exclusion is only through 2011, but you’re well within that time limit as well.
The one thing you MUST do is include a Form 982 with your tax return in the year that you receive the Form 1099-C. If you don’t, you’re telling the IRS that the COD income will be subject to tax.
If you received this form, contact our office immediately as you may qualify for the exemption.