An Item To Note
In addition to these specific instructions, you should also use the
2002 General Instructions for Forms 1099, 1098, 5498, and W-2G.
Those general instructions include information about:
- Backup withholding
- Magnetic media and electronic reporting requirements
- Penalties
- When and where to file
- Taxpayer identification numbers
- Statements to recipients
- Corrected and void returns
- Other general topics
You can get the general instructions from the IRS Web Site at
www.irs.gov or by calling 1-800-TAX-FORM (1-800-829-3676).
Specific Instructions for Form 1099-A
File Form 1099-A, Acquisition or Abandonment of Secured
Property, for each borrower if you lend money in connection with your
trade or business and, in full or partial satisfaction of the debt,
you acquire an interest in property that is security for the debt, or
you have reason to know that the property has been abandoned. You need
not be in the business of lending money to be subject to this
reporting requirement.
Coordination With Form 1099-C
If, in the same calendar year, you cancel a debt in connection with
a foreclosure or abandonment of secured property, it is not necessary
to file both Form 1099-A and Form 1099-C, Cancellation of
Debt, for the same debtor. You may file Form 1099-C only. You will
meet your Form 1099-A filing requirement for the debtor by making
entries in boxes 5 and 7 on Form 1099-C. However, if you file both
Forms 1099-A and 1099-C, make no Form 1099-A related entries in boxes
5 and 7 on Form 1099-C. See the instructions for Form 1099-C on page
AC-2.
Property
Property means any real property (such as a personal residence),
any intangible property, and tangible personal property except:
- No reporting is required for tangible personal property
(such as a car) held only for personal use. However, you must file
Form 1099-A if the property is totally or partly held for use in a
trade or business or for investment.
- No reporting is required if the property securing the loan
is located outside the United States and the borrower has furnished
the lender a statement, under penalties of perjury, that the borrower
is an exempt foreign person (unless the lender knows that the
statement is false).
Who Must File
In addition to the general rule specified above, the following
rules apply.
Multiple owners.
If there are multiple owners of undivided interests in a single
loan, such as in pools, fixed investment trusts, or other similar
arrangements, the trustee, record owner, or person acting in a similar
capacity must file Form 1099-A on behalf of all the owners of
beneficial interests or participations. In this case, only one form
for each borrower must be filed on behalf of all owners with respect
to the loan. Similarly, for bond issues, only the trustee or similar
person is required to report.
Governmental unit.
A governmental unit, or any of its subsidiary agencies, that lends
money secured by property must file Form 1099-A.
Subsequent holder.
A subsequent holder of a loan is treated as the lender for purposes
of the reporting requirement for events occurring after the loan is
transferred to the new holder.
Multiple lenders.
If more than one person lends money secured by property and one
lender forecloses or otherwise acquires an interest in the property
and the sale or other acquisition terminates, reduces, or otherwise
impairs the other lenders' security interests in the property, the
other lenders must file Form 1099-A for each of their loans. For
example, if a first trust holder forecloses on a building, and the
second trust holder knows or has reason to know of such foreclosure,
the second trust holder must file Form 1099-A for the second trust
even though no part of the second trust was satisfied by the proceeds
of the foreclosure sale.
Abandonment
An abandonment occurs when the objective facts and circumstances
indicate that the borrower intended to and has permanently discarded
the property from use. You have reason to know of an
abandonment based on all the facts and circumstances concerning the
status of the property. You will be deemed to know all the information
that would have been discovered through a reasonable inquiry when, in
the ordinary course of business, you become aware or should become
aware of circumstances indicating that the property has been
abandoned. If you expect to commence a foreclosure, execution, or
similar sale within 3 months of the date you had reason to know that
the property was abandoned, reporting is required as of the date you
acquire an interest in the property or a third party purchases the
property at such sale. If you expect to but do not commence such
action within 3 months, the reporting requirement arises at the end of
the 3-month period.
Statements to Borrowers
If you are required to file Form 1099-A, you must provide a
statement to the borrower. Furnish a copy of Form 1099-A or an
acceptable substitute statement to each borrower. For more information
about the requirement to furnish a statement to the borrower, see part
H in the General Instructions for Forms 1099, 1098,
5498, and W-2G.
Box 1. Date of Lender's Acquisition or Knowledge of Abandonment
For an acquisition, enter the date you acquired the secured
property. An interest in the property generally is acquired on the
earlier of the date title is transferred to the lender or the date
possession and the burdens and benefits of ownership are transferred
to the lender. If an objection period is provided by law, use the date
the objection period expires. If you purchase the property at a sale
held to satisfy the debt, such as at a foreclosure or execution sale,
use the later of the date of sale or the date the borrower's right of
redemption, if any, expires.
For an abandonment, enter the date you knew or had reason to know
that the property was abandoned unless you expect to commence a
foreclosure, execution, or similar action within 3 months, as
explained earlier. If a third party purchases the property at a
foreclosure, execution, or similar sale, the property is treated as
abandoned, and you have reason to know of its abandonment on the date
of sale.
Box 2. Balance of Principal Outstanding
Enter the balance of the debt outstanding at the time the interest
in the property was acquired or on the date you first knew or had
reason to know that the property was abandoned. Include only unpaid
principal on the original debt. Do not include accrued interest or
foreclosure costs.
Box 3. Reserved
Box 4. Fair Market Value (FMV) of Property
For a foreclosure, execution, or similar sale, enter the FMV of the
property. See Temporary Regulations section 1.6050J-1T, Q/A-32.
Generally, the gross foreclosure bid price is considered to be the
FMV. If an abandonment or voluntary conveyance to the lender in lieu
of foreclosure occurred and you checked Yes in box 5, enter the
appraised value of the property. Otherwise, make no entry in this box.
Box 5. Was Borrower Personally Liable for Repayment of the Debt?
Enter an X in the applicable box to indicate whether the
borrower was personally liable for repayment of the debt at the time
the debt was created or, if modified, at the time of the last
modification.
Box 6. Description of Property
Enter a general description of the property. For real property,
generally you must enter the address of the property, or, if the
address does not sufficiently identify the property, enter the
section, lot, and block.
For personal property, enter the applicable type, make, and model.
For example, describe a car as Car - 2001 Honda Accord. Use
a category such as Office Equipment to describe more than one
piece of personal property, such as six desks and seven computers.
Enter CCC for crops forfeited on Commodity Credit Corporation
loans
Specific Instructions for Form 1099-C
File Form 1099-C, Cancellation of Debt, for each debtor
for whom you canceled a debt owed to you of $600 or more only if:
- You are an entity described under Who Must File
below and
- An identifiable event has occurred. It does not matter
whether the actual cancellation is on or before the date of the
identifiable event. See When Is a Debt Canceled? on page
AC-3.
Form 1099-C must be filed regardless of whether the debtor is
required to report the debt as income.
The debtor may be an individual, corporation, partnership, trust,
estate, association, or company.
Do not combine multiple cancellations of a debt to determine
whether you meet the $600 reporting requirement unless the separate
cancellations are under a plan to evade the Form 1099-C requirements.
Coordination With Form 1099-A
If, in the same calendar year, you cancel a debt in connection with
a foreclosure or abandonment of secured property, it is not necessary
to file both Form 1099-A, Acquisition or Abandonment of
Secured Property, and Form 1099-C for the same debtor. You may file
Form 1099-C only. You will meet your Form 1099-A filing requirement
for the debtor by making entries in boxes 5 and 7 on Form 1099-C.
However, you may file both Forms 1099-A and 1099-C; if you do, make no
Form 1099-A related entries in boxes 5 and 7 on Form 1099-C. See the
instructions for Form 1099-A on page AC-1 and Box 5 and
Box 7 on page AC-4.
Who Must File
File Form 1099-C if you are:
- A financial institution described in section 581 or 591(a)
(such as a domestic bank, trust company, building and loan or savings
and loan association).
- A credit union.
- A Federal Government agency including:
- A department,
- An agency,
- A court or court administrative office, or
- An instrumentality in the executive, judicial, or
legislative branch of the Government, including Government
corporations.
- Any successor or subunit of one of he following:
- Federal Deposit Insurance Corporation,
- Resolution Trust Corporation,
- National Credit Union Administration,
- Any military department,
- U.S. Postal Service, or
- Postal Rate Commission.
- Any organization a significant trade or business of which is
the lending of money, such as a finance company or credit card company
(whether or not affiliated with a financial institution).
Also file Form 1099-C if you are a corporation that is a subsidiary
of a financial institution or credit union, but only if, because of
your affiliation, you are subject to supervision and examination by a
Federal or state regulatory agency.
Multiple creditors.
If a debt is owned (or treated as owned for Federal income tax
purposes) by more than one creditor, each creditor that is described
under Who Must File above must issue a Form 1099-C if that
creditor's part of the canceled debt is $600 or more. To meet this
requirement, a lead bank, fund administrator, or other designee of the
creditor may file a single Form 1099-C reporting the aggregate
canceled debt or may file Form 1099-C for that creditor's part of the
canceled debt. Use any reasonable method to determine the amount of
each creditor's part of the canceled debt.
Debt owned by a partnership is treated as owned by the partners and
must follow the rules for multiple creditors.
Pass-throughs and REMICs.
Until further guidance is issued, no penalty will apply for failure
to file Form 1099-C, or provide statements to debtors, for a canceled
debt held in a pass-through securitized debt arrangement or held by a
real estate mortgage investment conduit (REMIC). A pass-through
securitized debt arrangement is any arrangement in which one or more
debts are pooled and held for 20 or more persons whose interests in
the debt are undivided coownership interests that are freely
transferable. Coownership interests that are actively traded personal
property (as defined in Regulations section 1.1092(d)-1) are presumed
to meet these requirements.
Debt Defined
A debt is any amount owed to you including stated principal, stated
interest, fees, penalties, administrative costs, and fines. The amount
of debt canceled may be all or only part of the total amount owed.
However, for a lending transaction, you are required to report only
the stated principal. See Exceptions on page AC-3.
When To File
Generally, file Form 1099-C for the year in which an identifiable
event occurs. See Exceptions on page AC-3. If you cancel a
debt before an identifiable event occurs, you may choose to file Form
1099-C for the year of cancellation. No further reporting is required
even if a second identifiable event occurs on the same debt. Also, you
are not required to file an additional or corrected Form 1099-C if you
receive payment on a prior year debt.
When Is a Debt Canceled?
A debt is canceled on the date an identifiable event occurs. An
identifiable event occurs when the debt is canceled:
- Under Title 11 of the U.S. Code (bankruptcy) (reportable
only for business or investment debt; see Exceptions
below).
- Or extinguished making it unenforceable in a receivership,
foreclosure, or similar Federal or state court proceeding.
- Or extinguished when the statute of limitations for
collecting the debt expires, or when the statutory period for filing a
claim or beginning a deficiency judgment proceeding expires.
Expiration of the statute of limitations is an identifiable event only
when a debtor's affirmative statute of limitations defense is upheld
in a final judgment or decision of a court and the appeal period has
expired.
- When the creditor elects foreclosure remedies that by law
end or bar the creditor's right to collect the debt. This event
applies to a mortgage lender or holder who is barred by local law from
pursuing debt collection after a power of sale in the mortgage
or deed of trust is exercised.
- Due to a probate or similar proceeding.
- Under an agreement between the creditor and the debtor to
cancel the debt at less than full consideration if the last event
necessary to cancel the debt has occurred.
- Because of a decision or a defined policy of the creditor to
discontinue collection activity and cancel the debt. A creditor's
defined policy can be in writing or an established business practice
of the creditor. A creditor's practice to stop collection activity and
abandon a debt when a particular nonpayment period expires is a
defined policy.
- Because the nonpayment testing period expires. This event
occurs when the creditor has not received a payment on the debt during
the testing period. The testing period is a 36-month period ending on
December 31 plus any time when the creditor was precluded from
collection activity by a stay in bankruptcy or similar bar under state
or local law. The creditor can rebut the occurrence of this
identifiable event if (a) the creditor (or a third-party
collection agency) has engaged in significant bona fide collection
activity during the 12-month period ending on December 31 or
(b) facts and circumstances that exist on January 31
following the end of the 36-month period indicate that the debt was
not canceled. Significant bona fide collection activity does not
include nominal or ministerial collection action, such as an automated
mailing. Facts and circumstances indicating that a debt was not
canceled include the existence of a lien relating to the debt (up to
the value of the security) or the sale or packaging for sale of the
debt by the creditor.
Exceptions
You are not required to report on Form 1099-C the following:
- Certain bankruptcies. You are not required to
report a debt canceled in bankruptcy unless you know from information
included in your books and records that the debt was incurred for
business or investment purposes. If you are required to report a
business or investment debt canceled in bankruptcy, report it for the
later of (a) the year in which the amount of canceled debt
first can be determined or (b) the year in which the debt
is canceled in bankruptcy. A debt is incurred for business if it is
incurred in connection with the conduct of any trade or business other
than the trade or business of performing services as an employee. A
debt is incurred for investment if it is incurred to purchase property
held for investment (as defined in section 163(d)(5)).
- Interest. You are not required to report
interest. However, if you choose to report interest as part of the
canceled debt in box 2, you must show the interest separately in box
3.
- Nonprincipal amounts. For a lending transaction,
you are not required to report any amount other than stated principal.
A lending transaction occurs when a lender loans money to, or makes
advances on behalf of, a borrower (including revolving credit and
lines of credit). Nonprincipal amounts include penalties, fines, fees,
and administrative costs. However, for a nonlending transaction,
report any of these amounts that are included in the debt.
- Foreign debtors. Until further guidance is
issued, no penalty will apply if a financial institution does not file
Form 1099-C for a debt canceled by its foreign branch or foreign
office for a foreign debtor provided all the following apply:
- The financial institution is engaged in the active conduct
of a banking or similar business outside the United States.
- The branch or office is a permanent place of business that
is regularly maintained, occupied, and used to carry on a banking or
similar financial business.
- The business is conducted by at least one employee of the
branch or office who is regularly in attendance at the place of
business during normal working hours.
- The indebtedness is extended outside the United States by
the branch or office in connection with that trade or business.
- The financial institution does not know or have reason to
know that the debtor is a U.S. person.
- Related parties. Generally, a creditor is not
required to file Form 1099-C for the deemed cancellation of a debt
that occurs when the creditor acquires the debt of a related debtor,
becomes related to the debtor, or transfers the debt to another
creditor related to the debtor. However, if the transfer to a related
party by the creditor was for the purpose of avoiding the Form 1099-C
requirements, Form 1099-C is required. See section 108(e)(4).
- Release of a debtor. You are not required to file
Form 1099-C if you release one of the debtors on a debt as long as the
remaining debtors are liable for the full unpaid amount.
- Guarantor or surety. You are not required to file
Form 1099-C for a guarantor or surety. A guarantor is not a debtor for
purposes of filing Form 1099-C even if demand for payment is made to
the guarantor.
Multiple Debtors
For debts of $10,000 or more incurred after 1994 that involve
debtors who are jointly and severally liable for the debt, you must
report the entire amount of the canceled debt on each debtor's Form
1099-C. Multiple debtors are jointly and severally liable for a debt
if there is no clear and convincing evidence to the contrary. If it
can be shown that joint and several liability does not exist, a Form
1099-C is required for each debtor for whom you canceled a debt of
$600 or more.
For debts incurred before 1995 and for debts of less than $10,000
incurred after 1994, you must file Form 1099-C only for the primary
(or first-named) debtor.
If you know or have reason to know that the multiple debtors were
husband and wife who were living at the same address when the debt was
incurred, and you have no information that these circumstances have
changed, you may file only one Form 1099-C.
Recordkeeping
If you are required to file Form 1099-C, you must retain a copy of
that form or be able to reconstruct the data for at least 4 years from
the due date of the return.
Requesting TINs
You must make a reasonable effort to obtain the correct name and
taxpayer identification number (TIN) of the person whose debt was
canceled. You may obtain the TIN when the debt is incurred. If you do
not obtain the TIN before the debt is canceled, you must request the
debtor's TIN. Your request must clearly notify the debtor that the IRS
requires the debtor to furnish its TIN and that failure to furnish
such TIN subjects the debtor to a $50 penalty imposed by the IRS. You
may use Form W-9, Request for Taxpayer Identification
Number and Certification, to request the TIN. However, a debtor is not
required to certify his or her TIN under penalties of perjury.
Statements to Debtors
If you are required to file Form 1099-C, you must provide a
statement to the debtor. Furnish a copy of Form 1099-C or an
acceptable substitute statement to each debtor. For more information
about the requirement to furnish a statement to the debtor, see part
H in the General Instructions for Forms 1099, 1098,
5498, and W-2G. You have furnished a statement to the debtor if
it is mailed to the debtor's last known address.
Box 1. Date Canceled
Enter the date the debt was canceled. See When Is a Debt
Canceled? on page AC-3.
Box 2. Amount of Debt Canceled
Enter the amount of the canceled debt. See Debt Defined
on page AC-2 and Exceptions on page AC-3. Do not include
any amount the lender receives in satisfaction of the debt by means of
a settlement agreement, foreclosure sale, etc.
Box 3. Interest if Included in Box 2
Enter any interest you included in the canceled debt in box 2. You
are not required to report interest in box 2. But if you do, you also
must report it in box 3.
Box 4. Reserved
Box 5. Debt Description
Enter a description of the origin of the debt, such as student
loan, mortgage, or credit card expenditure. Be as specific as
possible. If you are filing a combined Form 1099-C and 1099-A, also
enter a description of the property.
Box 6. Check for Bankruptcy
Enter an X in the checkbox if you are reporting a debt
canceled in bankruptcy.
Box 7. Fair Market Value (FMV) of Property
Make an entry in this box only if you are filing a combined Form
1099-C and 1099-A. For a foreclosure, execution, or similar sale,
enter the FMV of the property. Generally, the gross foreclosure bid
price is considered to be the FMV. If an abandonment or voluntary
conveyance to the lender in lieu of foreclosure occurred, enter the
appraised value of the property.
First
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