Instructions For Forms 1099-A And 1099-C - 2006 (Page 4 of 27) in pdf

transferred to the lender. If an objection period is provided by

Katrina disaster area on August 25, 2005. This relief applies to

law, use the date the objection period expires. If you purchase

discharges made on or after August 25, 2005, and before

the property at a sale held to satisfy the debt, such as at a

January 1, 2007. However, KETRA did not change the reporting

foreclosure or execution sale, use the later of the date of sale or

requirements under section 6050P and its regulations. These

the date the borrower’s right of redemption, if any, expires.

requirements apply without regard to whether the debtor is

subject to tax on the discharged indebtedness.

For an abandonment, enter the date you knew or had reason

to know that the property was abandoned unless you expect to

Coordination With Form 1099-A

commence a foreclosure, execution, or similar action within 3

If, in the same calendar year, you cancel a debt in connection

months, as explained earlier. If a third party purchases the

with a foreclosure or abandonment of secured property, it is not

property at a foreclosure, execution, or similar sale, the property

necessary to file both Form 1099-A, Acquisition or

is treated as abandoned, and you have reason to know of its

Abandonment of Secured Property, and Form 1099-C for the

abandonment on the date of sale.

same debtor. You may file Form 1099-C only. You will meet

Box 2. Balance of Principal Outstanding

your Form 1099-A filing requirement for the debtor by

Enter the balance of the debt outstanding at the time the

completing boxes 5 and 7 on Form 1099-C. However, you may

interest in the property was acquired or on the date you first

file both Forms 1099-A and 1099-C; if you do, do not complete

knew or had reason to know that the property was abandoned.

boxes 5 and 7 on Form 1099-C. See the instructions for Form

Include only unpaid principal on the original debt. Do not

1099-A on page AC-1 and Box 5 and Box 7 on page AC-4.

include accrued interest or foreclosure costs.

Who Must File

Box 3. Reserved

File Form 1099-C if you are:

Box 4. Fair Market Value (FMV) of Property

1. A financial institution described in section 581 or 591(a)

(such as a domestic bank, trust company, building and loan or

For a foreclosure, execution, or similar sale, enter the FMV of

savings and loan association).

the property. See Temporary Regulations section 1.6050J-1T,

2. A credit union.

Q/A-32. Generally, the gross foreclosure bid price is considered

3. A federal government agency including:

to be the FMV. If an abandonment or voluntary conveyance to

the lender in lieu of foreclosure occurred, check “Yes” in box 5

a. A department,

and enter the appraised value of the property. Otherwise, make

b. An agency,

no entry in this box.

c. A court or court administrative office, or

d. An instrumentality in the executive, judicial, or legislative

Box 5. Was Borrower Personally Liable for

branch of the government, including government corporations.

Repayment of the Debt

4. Any of the following, its successor, or subunit of one of

Enter an “X” in the applicable box to indicate whether the

the following:

borrower was personally liable for repayment of the debt at the

a. Federal Deposit Insurance Corporation,

time the debt was created or, if modified, at the time of the last

b. Resolution Trust Corporation,

modification.

c. National Credit Union Administration,

d. Any military department,

Box 6. Description of Property

e. U.S. Postal Service, or

Enter a general description of the property. For real property,

f. Postal Rate Commission.

generally you must enter the address of the property, or, if the

5. A corporation that is a subsidiary of a financial institution

address does not sufficiently identify the property, enter the

or credit union, but only if, because of your affiliation, you are

section, lot, and block.

subject to supervision and examination by a federal or state

For personal property, enter the applicable type, make, and

regulatory agency.

model. For example, describe a car as “Car — 2001 Honda

6. For discharges occurring on or after January 1, 2005, any

Accord.” Use a category such as “Office Equipment” to describe

organization, a significant trade or business of which is the

more than one piece of personal property, such as six desks

lending of money, such as a finance company or credit card

and seven computers. Enter “CCC” for crops forfeited on

company (whether or not affiliated with a financial institution).

Commodity Credit Corporation loans.

The lending of money is a significant trade or business if money

is lent on a regular and continuing basis. Regulations section

1.6050P-2(b) lists three safe harbors under which reporting may

Specific Instructions for Form 1099-C

not be required for the current year. See Safe harbor rules

below.

File Form 1099-C, Cancellation of Debt, by February 28, 2007

(April 2, 2007, if filed electronically), for each debtor for whom

Safe harbor rules. The three safe harbor rules in which an

you canceled a debt owed to you of $600 or more only if:

entity will not be considered to have a significant trade or

1. You are an entity described under Who Must File below

business of lending money are:

and

1. No prior year reporting required. An organization will not

2. An identifiable event has occurred. It does not matter

have a significant trade or business of lending money for the

whether the actual cancellation is on or before the date of the

current year if the organization was not required to report in the

identifiable event. See When Is a Debt Canceled on page AC-3.

prior year and if its gross income from lending money in the

Form 1099-C must be filed regardless of whether the

most recent test year (see item 3 below) is less than both 15%

debtor is required to report the debt as income.

of the organization’s gross income and $5 million.

CAUTION

2. Prior year reporting requirement. An organization that

The debtor may be an individual, corporation, partnership,

had a prior year reporting requirement will not have a significant

trust, estate, association, or company.

trade or business of lending money for the current year if, for

each of the three most recent test years, its gross income from

Do not combine multiple cancellations of a debt to determine

lending money is less than both 10% of the organization’s gross

whether you meet the $600 reporting requirement unless the

income and $3 million.

separate cancellations are under a plan to evade the Form

3. No test year. Newly formed organizations are considered

1099-C requirements.

not to have a significant trade or business of lending money

Reminder. Section 401 of the Katrina Emergency Tax Relief

even if the organization lends money on a regular and

Act (KETRA) of 2005 excluded discharges of certain

continuing basis. However, this safe harbor does not apply to

nonbusiness debts, such as mortgages, from income for

an entity formed or availed of for the principal purpose of

individuals whose principal residence was in the Hurricane

holding loans acquired or originated by another entity. In this

AC-2

Instructions For Forms 1099-A And 1099-C - 2006 Page 4

Related Articles

Related forms

Related Categories