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    kugelle's Avatar
    kugelle Posts: 1, Reputation: 1
    New Member
    		  
    #1

    Feb 27, 2011, 10:42 AM
    1099-C Check Fraud
    Have a 1099-C and am not certain how to handle this.
    Other Boxes:
    #4 Debt description - DDA CHECK FRAUD
    #5 Was borrower personally liabile for repayment of this debt? NO
    #6 Bankuptcy NO

    Since it states that I was not personally liabile for repayment of this debt - is this just not included on my taxes. When I use a tax program, it only as for the amount in Box 2 and never asks question 5 that I can find.

    Would appreciate advise on this..

    Thank you!
    MukatA's Avatar
    MukatA Posts: 7,110, Reputation: 176
    Tax Expert
    		  
    #2

    Feb 28, 2011, 12:21 AM

    Since your are not personally liable to pay the amount, it is not income. Just keep the form for your info.
    Your U.S. Tax Return: The U.S. Income Tax Topics 1
    ebaines's Avatar
    ebaines Posts: 12,131, Reputation: 1307
    Expert
    		  
    #3

    Mar 1, 2011, 12:38 PM

    It's not clear to me how this "check fraud" is considered as cancellation of debt to you - if you could provide some additional background it would be helpful. Mukata is correct that cancelation of debt that you are not liable for is not income to you - however it may still have to reported if either (a) the lender offered you a discount for early payment of the debt, or (b) agrees to a loan modification that reducs the principal balance of the debt. You may also realize a captal gain if/when you sell the property as your proceeds from the sale includes the unpaid amount of debt. There are more details in Pub 4681:
    http://www.irs.gov/pub/irs-pdf/p4681.pdf
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