1099-A vs. 1099-C

What is the difference between a 1099-A and 1099-C, and how will we know when our bank canceled our mortgage debt?

We had a piece of raw land (lot) in TX that was foreclosed on in 2009. We received a 1099A from the bank showing the bank taking a substantial loss (mortgage owed at time of foreclosure compared to FMV at time of foreclosure). We are personally liable for the debt as it is recourse debt. We have not received a 1099C. Our tax accountant is showing that we have no income to report in 2009 as we are still personally liable for the debt. I read on your site that TX has a 2 year statute of limitations on the debt collection. At what point does the debt that exceeded the value of the property become taxable to us? What must the bank send us to show that it is taxable once they relinquish their rights to sue (as long as 2 years from the foreclosure)?

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  • A lender issues 1099-A when a borrower abandons a property.
  • A financial institution issues a 1099-C when it forgives a debt.
  • Canceled mortgage debt may not be taxable.

A creditor is required to issue a 1099-A when a borrower abandons real or personal property. According to the IRS 1099-A instructions, "An abandonment occurs when the objective facts and circumstances indicate that the borrower intended to and has permanently discarded the property from use."

A 1099-A is not a notice of forgiveness. It is unclear to me what the purpose of a 1099-A is, other than to alert the IRS that at some point in the future the entity reporting the borrower's abandonment may issue a 1099-C.

A 1099-C is a notice to the IRS that the financial institution has forgiven or canceled a debt of $600 or more. See the IRS Instructions for Forms 1099-A and 1099-C and IRS Form 982 to learn more.

If the financial institution issues a 1099-C to you, then it has forgiven the debt and you must report the amount on the 1099-C as income. Fortunately, the Mortgage Forgiveness Debt Relief Act allows taxpayers to exclude income from the discharge of debt on their principal residence. It includes the cancelation of the complete debt, or if the mortgage terms were renegotiated.

If the financial institution issues a 1099-C to you, it will probably not pursue you for the deficiency balance because it has deducted the loss on the loan from its taxes. However, there is no guarantee the financial institution will not pursue you for the deficiency balance and then later amend its tax returns. However, such a chain of events is unlikely.

I hope this information helps you Find. Learn & Save.





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  • PM
    Apr, 2012
    I had taken out two loans for my home which was foreclosed last year. I received a 1099 a & c from one institution and just a 1099a from the other. How do I go about filing with just one of the 1099c?
    1 Votes

  • FK
    Apr, 2012
    My husband and I sent a certified letter to our bank in May, 2010, informing them that we were forced to abandon the property for health reasons, and enclosed the keys. They waited several months before starting foreclosure and did not complete the process until August, 2011 when they bought back the property for $230,000 less than we paid for it. They resold the property in December, 2011 for $30,000 more than they paid. We finally received a 1099-A that says in Box 1 that they acquired the property in December, 2011 (which is incorrect; they purchased it in August) also ignoring that we abandoned the property via certified letter in 2010. Should we ask them to send a corrected 1099A for August, 2011 (when they purchased the property) or for May, 2010 when we notified them of the abandonment? If they ever forgive the debt, we would not qualify for the 2-year primary residence requirement if the December 2011 date is used.
    0 Votes

  • JR
    Mar, 2012
    I have received a 1099A for tax year 2010 (foreclosure date Sept,2010) The bank sold the property July 2011. I did not receive a 1099C for 2011. Does the lending bank have a time limit for issue? (Mortgage amount $205K plus costs, sales price $38K)
    0 Votes

  • NS
    Feb, 2012
    What happens if the lender NEVER sends you a 1099A or 1099C? I called and they said they have no tax record information on my account, so it seems there is nothing to send out.
    0 Votes

  • GM
    Feb, 2012
    If I received a 1099 A from a lender for a foreclosure, do I need to show that on my taxes?
    0 Votes