Code C is used to identify cancellation of debt either when the statute of limitations for collecting the debt expires or when the statutory period for filing a claim or beginning a deficiency judgment proceeding expires. Code B is used to identify cancellation of debt as a result of a receivership, foreclosure, or similar federal or state court proceeding other than bankruptcy.Ĭode C-Statute of limitations or expiration of deficiency period. See Bankruptcy, later.Ĭode B-Other judicial debt relief. Code A is used to identify cancellation of debt as a result of a title 11 bankruptcy case. Also, see the chart after the explanation for a quick reference guide for the codes used in box 6.Ĭode A-Bankruptcy. The codes shown in box 6 are explained next. Figuring your gain or loss and income from canceled debt arising from an abandonment is discussed later under Abandonments.īox 6 of Form 1099-C should indicate the reason the creditor filed this form.
Generally, you abandon property when you voluntarily and permanently give up possession and use of property you own with the intention of ending your ownership but without passing it on to anyone else. Figuring your gain or loss and income from canceled debt arising from a foreclosure or repossession is discussed later under Foreclosures and Repossessions. Whether you also recognize income from canceled debt depends in part on whether you are personally liable for the debt and in part on whether the outstanding loan balance is more than the fair market value (FMV) of the property. When your property is foreclosed upon or repossessed and sold, you are treated as having sold the property and you may recognize taxable gain.
These remedies allow the lender to seize or sell the property securing the loan. But if you do exclude canceled debt from income, you may be required to reduce your “tax attributes.” These exclusions and the reduction of tax attributes associated with them are discussed later under Exclusions.įoreclosure and repossession are remedies that your lender may exercise if you fail to make payments on your loan and you have previously granted that lender a mortgage or other security interest in some of your property. Sometimes a canceled debt may be excluded from your income. These exceptions are discussed later under Exceptions. Sometimes a debt, or part of a debt, that you don't have to pay isn't considered canceled debt.
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This publication generally refers to debt that is canceled, forgiven, or discharged for less than the full amount of the debt as “canceled debt.”
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