Who Reports the 1099-C?


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?”

Dear Goran.

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.

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6 thoughts on “Who Reports the 1099-C?

  1. Ellen says:

    TaxMama,
    My daughter and I were on the loan for her condo. It was her primary residence and I helped make the mortgage. I also claimed the deduction on Sch A. We both received 1099-Cs for the entire amount from Chase. Isn’t that wrong? Do we need corrected forms from Chase? How do we report this on our tax returns.
    Many thanks,
    Confused

  2. Janet says:

    Jack,

    You don’t back it out as a miscellaneous deduction. You back it out on line 21 too. Assuming she is e-filing they will get a record of the individual transactions because there is a supplementary schedule for line 21. It is not an itemized deduction if that’s what you were talking about.

    The cancelled debt goes on your schedule E BTW.

  3. TaxMama says:

    Hi Jack,

    That arrangement makes perfect since, since it was really your property.

    ALWAYS report the full amount of any 1099 on the tax return of the person whose Social Security number is on the 1099 (your daughter). Then, go through the steps to back it out and to explain who IS reporting the income.

    And you two, you should look to see if the insolvency exclusion applies to you.

    Hugs
    Eva

  4. Jack says:

    My wife, daughter and me are on title to the same rental property that was foreclosed upon in 2012, but my daughter was the only one to receive a 1099-c for the cancelled debt. However, my wife and I have been totally responsible for down payment, upgrades, maintenance expenses, claiming rental income/expenses on our tax returns, etc. Therefore, in concert with my daughter, we’ve all agreed that my wife & I should take the entire cancelled debt as well as the offsetting loss on sale (Form 4797). Does this sound appropriate given our involvement/benefit and daughter’s lack of? Should my daughter actually report the income on her return (line 21-1040), then back it out under a “miscellaneous deduction” category along with an explanation of the circumstances or just submit the explanation with tax return? Thanks for your help

  5. TaxMama says:

    Hi Janet

    Good point.

    BUT…if Mom’s SSN is the one on the 1099C, she sure a shooting had better report that income.
    Then, take it back out, as described above.

    My advice does not change.

    Hugs
    Eva

  6. Janet says:

    Well Ok Mamma but…..

    What if Mom was only on to give Sonny enough credit to buy the house. She never lived in the house, it was all Sonny’s to pay for, fix up, repair etc. He was the beneficial owner. I recently became aware of IRS Office of Chief Counsel memorandum number 200023001 dated 6/9/00 that addresses the issue of co signers. In this case the cosigners were husband and wife at the time of the loan. The memo indicated that he who got the benefit should pay the piper and that the income should be allocated based on the respective parties benefits received.

    What is your take on this

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