Barb Posted August 24, 2011 Report Share Posted August 24, 2011 In March 2006, son wants to buy waterfront land to build rental/vacation home. Does not have good enough credit so talks mother into signing loan papers with him. Purchase price $162,000. Both monther and son are on deed and mortgage ($145,800) filings. In 2009, son loses job and can not make payments - real estate market bottoms out and can not sell it. Ends up with short sale on 7/9/10 for $24,900. Mother receives 1099-C for $120,603 with 0.00 in FMV box. She has too many assets for insolvency and ends up with big tax bill. Loss on sale only gives her $3000 capital gains loss. My best idea is to get 1099-C transfered into son's social security number since I think he will qualify for insolvency. Question - is there a way to transfer 1099-C to son without going through bank since that would probably be a losing battle. Any other suggestions would also be appreciated to help mother. Quote Link to comment Share on other sites More sharing options...
ILLMAS Posted August 24, 2011 Report Share Posted August 24, 2011 In March 2006, son wants to buy waterfront land to build rental/vacation home. Does not have good enough credit so talks mother into signing loan papers with him. Purchase price $162,000. Both monther and son are on deed and mortgage ($145,800) filings. In 2009, son loses job and can not make payments - real estate market bottoms out and can not sell it. Ends up with short sale on 7/9/10 for $24,900. Mother receives 1099-C for $120,603 with 0.00 in FMV box. She has too many assets for insolvency and ends up with big tax bill. Loss on sale only gives her $3000 capital gains loss. My best idea is to get 1099-C transfered into son's social security number since I think he will qualify for insolvency. Question - is there a way to transfer 1099-C to son without going through bank since that would probably be a losing battle. Any other suggestions would also be appreciated to help mother. If the son was on the mortgage, then the bank shouldn't have a problem changing the name to him. You can try using the 1099-C on the son return, but most likely he will get a notice disallowing it, and you will spend a lot of time going back and forth with the IRS, I had something like this happen with a mortgage 1098. A husband and wife had the husband parent co-sign a loan, parents had better credit and income score, so they became the primary borrower, the 1098 was issued under the parents name and SS#, two years later they get a notice disallowing the deduction on Sch A. The IRS wanted for the mortgage company to change the name and SS# on the 1098 and that would solve the problem, well it wasn't easy, the bank that had originally sent out the 1098 was no longer in business, so the IRS ended accepting a copy of the mortgage loan statement as proof that tax payer were on the loan. MAS Quote Link to comment Share on other sites More sharing options...
ed_accountant Posted August 25, 2011 Report Share Posted August 25, 2011 If the bank will not correct / change the 1099, report the 1099 C on both returns. On the mother's return, report the 1099-C income but then reverse it out as such: 1099-C Income $120,603 Reported Elsewhere Social Security #_________ -120,603 Total 0 The son should then report the 1099 C income. Quote Link to comment Share on other sites More sharing options...
Pacun Posted August 25, 2011 Report Share Posted August 25, 2011 I see it differently. If the mother has assets, she should pay taxes for the debt forgiveness. She was liable for the debt and the debt was forgiven. Most banks send out one 1099-C for each client on the loan and they include the same figures. I am surprise the bank didn't go after her assets. That's the reason why I tell my clients NOT to sign for anyone else. Quote Link to comment Share on other sites More sharing options...
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