1099 on discharged mortage?

[dm415]

I recieved a 1099 on a discharged non-reaffirmed mortage.Isnt there a form to fill out to fix this,I thought there would be no 1099 on a discharged mortage.

[momtoroxy]

For taxes? We were having this discussion earlier this week! LOL. Did you pay any house payments for the year of 2009? We paid Jan-Oct, so even though we filed, did not reaffirm, and were already discharged, I am deducting what we paid.

[sofarsogood2]

From IRS WEbsite:

Update Dec. 11, 2008 — The Mortgage Forgiveness Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualify for this relief.

This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion doesn’t apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.

2. Is Cancellation of Debt income always taxable?

Not always. There are some exceptions. The most common situations when cancellation of debt income is not taxable involve:

Bankruptcy: Debts discharged through bankruptcy are not considered taxable income.
Insolvency: If you are insolvent when the debt is cancelled, some or all of the cancelled debt may not be taxable to you.You are insolvent when your total debts are more than the fair market value of your total assets.Insolvency can be fairly complex to determine and the assistance of a tax professional is recommended if you believe you qualify for this exception.
Certain farm debts:If you incurred the debt directly in operation of a farm, more than half your income from the prior three years was from farming, and the loan was owed to a person or agency regularly engaged in lending, your cancelled debt is generally not considered taxable income.The rules applicable to farmers are complex and the assistance of a tax professional is recommended if you believe you qualify for this exception.
Non-recourse loans:A non-recourse loan is a loan for which the lender’s only remedy in case of default is to repossess the property being financed or used as collateral.That is, the lender cannot pursue you personally in case of default.Forgiveness of a non-recourse loan resulting from a foreclosure does not result in cancellation of debt income.However, it may result in other tax consequences, as discussed in Question 3 below.




From what I understand, there is no tax liability if there is a bankruptcy discharge.
If you do not qualify for protection of the new Act ,there is an insolvency exception to imputed income from the cancellation of mortgage debt.
If you filed BK, OR are insolvent (ie: assets are less than liabilities) at the time of foreclosure, there is no tax on the "income".
If a borrower is financially insolvent when he surrenders the mortgaged property to the lender voluntarily, or through foreclosure, there will be no imputed income.
A borrower who files bankruptcy is presumed to be insolvent, so that a bankruptcy debtor cannot suffer imputed income.

I believe there is a form (982, I think) that you file with your taxes to dispute the imputed income on the 1099.

Go to the IRS website and do a search on 1099-C: Cancellation of Debt- there is even a worksheet to help you calculate if you were insolvent at the time of the foreclosure.

Hope that helps- of course , check with your accountant to verify this information and determine your situation.

Best Wishes!

[dm415]

Good info,thanks.