Form 1099-C Information
6th December 2008 by Tax Man No CommentsForm 1099-C Information
A short sale is the amount that a certain lender or mortgage company has agreed to cancel before a foreclosure. For example, when a house is sold by the homeowner and the price that he sells his or her house for is less than what he owes a lender or mortgage company, this is called a short sale. When this happens, a form 1099-C is issued which a statement coming from the certain lender or mortgage company which says that debt amount that is shows has already been canceled before foreclosure. However, the amount that is shown on a 1099-C is still considered as income that is taxable which must be claimed on federal tax returns.
Form 1099-C Information
The form 1099-C states that when you have paid the income tax on the forgiven amount by the lender or mortgage company, the creditor cannot ask for the same amount again because the debt is considered as forgiven.
How to figure out the cancellation of debt income can be quite tricky. Here is how it goes: The debt amount cancelled or forgiven by the lender or mortgage company, less the market value of the property, which is usually provided on the form 1099-C. If the result amounts to zero, then you will not have to owe any taxes.
If a homeowner receives a form 1099-C, it is very important for the homeowner to ensure that the amount that is provided on the form by the mortgage company or lender is correct.
