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Current Year Tax Map
Rev. date: 11/06/2012


Form 1099-A (Acquisition or Abandonment of Secured Property) and Form 1099-C (Cancellation of Debt)

Tax Topic 160
rule
If you borrow money from a lender to purchase property, the lender may require the loan to be secured by the purchased property. If you transfer an interest in the secured property to the lender (such as in a foreclosure) or abandon the property, you may be required to treat the transfer or the abandonment as a sale of the property. If the lender acquires an interest in the secured property or has reason to know that you abandoned, or permanently discarded from use, the secured property, the lender should send you a Form 1099-A, Acquisition or Abandonment of Secured Property.
When you borrow money, you are not required to include the loan proceeds in gross income because you have an obligation to repay the lender later. If that obligation is subsequently canceled, you may be required to include the amount of the canceled debt in gross income. A commercial lender canceling a debt will issue a Form 1099-C , Cancellation of Debt, to report the cancellation.
On Form 1099-A, the lender reports the amount of the debt owed (principal only) and the fair market value of the secured property. You, the debtor, use these values to determine a gain or loss on the disposition of the property. On Form 1099-C, the lender reports the amount of the canceled debt. If the lender's acquisition of an interest in the secured property (or the debtor's abandonment of the property) and the cancellation of the debt occur in the same calendar year, the lender may issue a Form 1099-C only. See Tax Topic 431 for additional information on Form 1099-C.
If you receive a Form 1099-A, or Form 1099-C containing incorrect information, contact the lender to make corrections. For additional information on foreclosures and abandonments, refer to Publication 544, Sales and Other Dispositions of Assets.
In certain situations, you may exclude cancellation of debt income in whole or in part. For example, if you have cancellation of debt income on your principal residence, you may be able to exclude part or all of the amount canceled from your income under the Mortgage Forgiveness Debt Relief Act of 2007. For additional information, refer to Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments (For Individuals), Tax Topic 431, and Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment).