IRS Form 1099-A, 1099-C and the Cancellation of Debt in Foreclosure

Posted by Mark on Feb 2, 2011 in Tax Tips | 0 comments

Okay, so misinformation and confusion about the tax implications of foreclosure arising from the cancellation of debt seems to be piling up. In particular, folks seem most confused by the receipt of Form 1099-A from lenders who have taken property back in foreclosure. First, remember the basic principle: Cancellation of debt MAY result in taxable ordinary income. Second, because a foreclosure is viewed as a “sale of property,” if you let real estate go in foreclosure and it results in a cancellation of debt, then that...