Instructions For Forms 1099-A And 1099-C - 2006 (Page 6 of 27) in pdf

will be imposed for failure to report these amounts in

Requesting TINs

nonlending transactions.

You must make a reasonable effort to obtain the correct name

4. Foreign debtors. Until further guidance is issued, no

and taxpayer identification number (TIN) of the person whose

penalty will apply if a financial institution does not file Form

debt was canceled. You may obtain the TIN when the debt is

1099-C for a debt canceled by its foreign branch or foreign

incurred. If you do not obtain the TIN before the debt is

office for a foreign debtor provided all the following apply:

canceled, you must request the debtor’s TIN. Your request

a. The financial institution is engaged in the active conduct

must clearly notify the debtor that the IRS requires the debtor to

of a banking or similar business outside the United States.

furnish its TIN and that failure to furnish such TIN subjects the

b. The branch or office is a permanent place of business

debtor to a $50 penalty imposed by the IRS. You may use Form

that is regularly maintained, occupied, and used to carry on a

W-9, Request for Taxpayer Identification Number and

banking or similar financial business.

Certification, to request the TIN. However, a debtor is not

c. The business is conducted by at least one employee of

required to certify his or her TIN under penalties of perjury.

the branch or office who is regularly in attendance at the place

Statements to Debtors

of business during normal working hours.

If you are required to file Form 1099-C, you must provide a

d. The indebtedness is extended outside the United States

statement to the debtor. Furnish a copy of Form 1099-C or an

by the branch or office in connection with that trade or business.

acceptable substitute statement to each debtor. For more

e. The financial institution does not know or have reason to

information about the requirement to furnish a statement to the

know that the debtor is a U.S. person.

debtor, see part M in the 2006 General Instructions for Forms

5. Related parties. Generally, a creditor is not required to

1099, 1098, 5498, and W-2G. You have furnished a statement

file Form 1099-C for the deemed cancellation of a debt that

to the debtor if it is mailed to the debtor’s last known address.

occurs when the creditor acquires the debt of a related debtor,

becomes related to the debtor, or transfers the debt to another

Account Number

creditor related to the debtor. However, if the transfer to a

The account number is required if you have multiple accounts

related party by the creditor was for the purpose of avoiding the

for a debtor for whom you are filing more than one Form

Form 1099-C requirements, Form 1099-C is required. See

1099-C. Additionally, the IRS encourages you to designate an

section 108(e)(4).

account number for all Forms 1099-C that you file. See part L in

6. Release of a debtor. You are not required to file Form

the 2006 General Instructions for Forms 1099, 1098, 5498, and

1099-C if you release one of the debtors on a debt as long as

W-2G.

the remaining debtors are liable for the full unpaid amount.

7. Guarantor or surety. You are not required to file Form

Box 1. Date Canceled

1099-C for a guarantor or surety. A guarantor is not a debtor for

Enter the date the debt was canceled. See When Is a Debt

purposes of filing Form 1099-C even if demand for payment is

Canceled on page AC-3.

made to the guarantor.

Box 2. Amount of Debt Canceled

8. Seller financing. Organizations whose principal trade or

business is the sale of non-financial goods or non-financial

Enter the amount of the canceled debt. See Debt Defined on

services, and who extend credit to customers in connection with

page AC-3 and Exceptions on page AC-3. Do not include any

the purchase of those non-financial goods and non-financial

amount the lender receives in satisfaction of the debt by means

services, are not considered to have a significant trade or

of a settlement agreement, foreclosure sale, etc.

business of lending money, with respect to the credit extended

Box 3. Interest if Included in Box 2

in connection with the purchase of those goods or services, for

reporting discharge of indebtedness on Form 1099-C. See

Enter any interest you included in the canceled debt in box 2.

Regulations section 1.6050P-2(c). But the reporting applies if a

You are not required to report interest in box 2. But if you do,

separate financing subsidiary of the retailer extends the credit

you also must report it in box 3.

to the retailer’s customers.

Box 4. Reserved

Multiple Debtors

Box 5. Debt Description

For debts of $10,000 or more incurred after 1994 that involve

Enter a description of the origin of the debt, such as student

debtors who are jointly and severally liable for the debt, you

loan, mortgage, or credit card expenditure. Be as specific as

must report the entire amount of the canceled debt on each

possible. If you are filing a combined Form 1099-C and 1099-A,

debtor’s Form 1099-C. Multiple debtors are jointly and severally

include a description of the property.

liable for a debt if there is no clear and convincing evidence to

Box 6. Check for Bankruptcy

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

Check the box if you are reporting a debt canceled in

whom you canceled a debt of $600 or more.

bankruptcy.

For debts incurred before 1995 and for debts of less than

Box 7. Fair Market Value (FMV) of Property

$10,000 incurred after 1994, you must file Form 1099-C only for

If you are filing a combined Form 1099-C and 1099-A for a

the primary (or first-named) debtor.

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

If you know or have reason to know that the multiple debtors

property. Generally, the gross foreclosure bid price is

were husband and wife who were living at the same address

considered to be the FMV. If an abandonment or voluntary

when the debt was incurred, and you have no information that

conveyance to the lender in lieu of foreclosure occurred, enter

these circumstances have changed, you may file only one Form

the appraised value of the property.

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.

AC-4

Instructions For Forms 1099-A And 1099-C - 2006 Page 6

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