1099 C

Foreclosures, Short Sales, Tax Foreclosures
1

Hi All,

I was wondering if anyone knows about filing a 1099C.

I sold a property with seller financing and the buyer paid as agreed. Last year the buyer want to pay off the note and we negotiated a discount.

Do I need to file a 1099C for the amount discounted (forgiven)?

I was looking through the 1099C instructions which list the following as an exception:

  1. Seller financing. Organizations whose principal
    trade or business is the sale of non-financial goods or
    non-financial services, and who extend credit to
    customers in connection with the purchase of those
    non-financial goods and non-financial services, are not
    considered to have a significant trade or business of
    lending money, with respect to the credit extended in
    connection with the purchase of those goods or services,
    for reporting discharge of indebtedness on Form 1099-C.
    See Regulations section 1.6050P-2(c). But the reporting
    applies if a separate financing subsidiary of the retailer
    extends the credit to the retailer’s customers

Thanks for your help.

2

Hi,

 You don't send the buyer anything, your the one who decided to except a "Short Offer" on your note. The fact the buyer made a few extra bucks is icing on his cake. You did not need to necessarily agree to a "Shorted Note" because you already had an agreement with the original note.

I think it was nice to help your buyer out since he paid you as agreed, but your the one who made the decision to “Short” it!

          GR
3

Hmm. Thanks GoldRiver,

I never thought of it that way.

On another note…regarding 1098-INT…
I just got off the phone with IRS agent regarding the submission of 1098-INT (note this is 1098).
She said if I do seller financing here and there (not as a business), I am not required to submit a 1098-int. A statement to the buyer indicating the interest paid (which the buyer can use for filing his taxes) will suffice.

I was under the impression that 1098-int had to be filed - always! (if the interest amount > $600)

4

Re: 1098-Int
We hold notes as private lenders & one year when our CPA neglected to e-file the 1098’s we were charged $50/1098 for late filing. They were in fact mailed on-time (Jan) but not certified so we couldn’t prove it was on-time & the IRS said they didn’t get them until April!!!.
So file it & certify the mailing unless your tax guy has the e-file option.

5

There is no 1098-INT.

I think you may mean 1099-INT. This is used when you PAY interest, so that the recipient has to report the interest income.

1098 is used when you RECEIVE mortgage interest, so that the payor can deduct it, and so IRS can make sure that you report it as income.

RE: 1099-C. You don’t need to file it. The mortgage was not foreclosed or abandoned, so it’s technically a “work-out.” You don’t report cancelled debt, and it’s up to the buyer to reduce their basis in the house by the reduction in principal. (Give or take. it’s more complicated than this, but this is the basics.)