Today TaxMama® hears from Goran in the TaxQuips Forum, with this issue. “My client and his mom were on the mortgage together. That property went through foreclosure. Naturally, they file separate tax returns. Which one will report the 1099-C?”
Aaah…a question that’s easy. But one that applies to many people who share ownership of assets and get only one 1099 to report a variety of income sources, like this 1099-C. (This is called nominee income.)
First of all, the IRS computer will be looking for income on ONE tax return. So, whose Social Security Number is on the 1099-C? That person certainly has to report it.
Now, if Mom was only responsible for half of it, she needs to include a disclosure statement saying so – and spelling out that the other half belongs to her son, including his name, address SSN and the amount of his share. She will be filing her tax return on paper, not electronically, in order to include this information.
Once you’ve taken care of that, they will each report their share of the cancelled debt -and do their own computations about insolvency or whatever needs to be done to minimize the tax impact.
And remember, you can find answers to all kinds of questions about how to split up 1099 income and other tax and business issues, free. Where? Where else? At www.TaxMama.com.[Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]
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