Quote:
Originally Posted by Lacerta
Did you receive a 1099C forgiveness of debt notice from the IRS? If you did, then that means the debt was written off and you no longer owe it. If you didn't, then it is possible you still owe it.
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This is a very gray area, that one might better discuss with their attorney or CPA.
It has previously been explained to me by both a bankruptcy attorney & a CPA at a foreclosure symposium that a 1099C does not necessarily indicate that the debt is forgiven, just that, for the time being, the note holder is writing it off as a loss on their taxes. It's
their notice to the IRS that they're taking a deduction at this time.
But the note holder
may still retain the option of
amending a future tax return, & subsequently still seek a deficiency at a later date, depending on the foreclosure or short sale laws, & statute of limitations, in each individual state.
In short, a 1099C is more of a notice to the IRS from the note holder that they've given up on trying to collect a debt
at this time.
But it's not necessarily a get out of jail free card to the debtor.
If the debtor was insolvent the year the note holder took the write off, the debtor was excused from taxation on that unearned income.
But if the note holder later decided to pursue the unpaid deficiency, & was subsequently successful in collecting, they would simply file an amendment to the earlier return.
A recent court case ruled that even if the bank gives the borrower a 1099, the bank can still can go back after the borrower for the remaining amount for up to three years, because both the bank and the borrower have up to three years to amend their IRS returns.