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IRS Audits

Chapter 6. Payer Compliance

Section 2. Information Returns and Information Reporting (Cont. 2)

4.6.2  Information Returns and Information Reporting (Cont. 2)

4.6.2.6 
Form 1098-T, Tuition Payments Statements

4.6.2.6.8  (08-01-2002)
References

  1. Taxpayer Relief Act of 1997, Public Law No. 105-34, Section 201.

  2. IRS Notices 97-73, 98-46, 98-59, 98-7, 98-54 and 99-37.

  3. Instructions for Forms 1099, 1098, 5498, and W-2G.

  4. Proposed Reg. 1.25A (January 6, 1999).

  5. Proposed Reg. 1.6050S-1 (June 16, 2000).

4.6.2.7  (08-01-2002)
Form 1099-A, Acquisition or Abandonment of Secured Property/Form 1099-C, Cancellation of Debt

  1. This part of Section 2 contains the filing requirements for Form 1099–A, Acquisition or Abandonment of Secured Property and Form 1099–C, Cancellation of Debt.

4.6.2.7.1  (08-01-2002)
Law

  1. IRC section 6050J requires persons who lend money secured by property, in the course of their trade or business, to make a return with respect to acquisitions and abandonments of that property. Form 1099-A is used.

  2. IRC section 6050P requires that any applicable entity which discharges the indebtedness of any person during the calendar year to make a return with respect to the cancellation of the debt. Form 1099-C is used.

4.6.2.7.2  (08-01-2002)
Definitions

  1. An abandonment occurs when the objective facts and circumstances indicate that the borrower intended to and has permanently discarded the property from use.

  2. An acquisition occurs when a lender in full or partial satisfaction of a debt acquires an interest in the property that secures the debt.

  3. Property means any real property, any intangible property, and tangible personal property except:

    1. Tangible personal property held only for personal use.

    2. The property securing the loan is outside the US and the borrower has certified that he is an exempt foreign person.

     

  4. A debt is any amount owed including stated principal, stated interest, fees, penalties, administrative costs, and fines.

  5. A REMIC is a real estate mortgage investment conduit.

  6. A pass-through securitized debt arrangement is any arrangement in which one or more debts are pooled and held for 20 or more persons whose interests in the debt are undivided co-ownership interests that are freely transferable.

  7. An identifiable event occurs when a debt is cancelled:

    1. Under Title 11 of the US Code (bankruptcy); or

    2. Is extinguished making it unenforceable in a receivership, foreclosure, or similar Federal or state court proceeding; or

    3. Is extinguished when the statute of limitations for collecting the debt expires. Because the creditor elects foreclosure remedies that by law end or bar the creditor's right to collect the debt due to a probate or similar proceeding under an agreement to cancel the debt, if the last event necessary to cancel the debt has occurred; because the creditor decides under a defined policy to discontinue collection activity and cancel the debt; or because the nonpayment testing period expires.

     

4.6.2.7.3  (08-01-2002)
Who Must File Form 1099–A

  1. The following persons are required to file a Form 1099-A:

    1. If there are multiple owners of undivided interests in a single loan, the trustee, record owner, or similar acting person must file Form 1099-A on behalf of all beneficial owners or participants.

    2. Governmental units.

    3. A subsequent holder of the loan.

    4. If more than one person lends money secured by property and one lender forecloses or otherwise acquires an interest in the property, the other lenders that have loaned money that was secured by the same property, even though no part of the second trust was satisfied by the proceeds of a foreclosure sale.

     

4.6.2.7.4  (08-01-2002)
Exception

  1. If a lender cancels a debt in connection with an abandonment or foreclosure in the same calendar year, it is not necessary to file both Forms 1099-A and 1099-C. Form 1099-A requirements can be met by completing Boxes 5 and 7 on Form 1099-C.

4.6.2.7.5  (08-01-2002)
Reporting Requirements Form 1099–A

  1. Lenders are required to file Form 1099–A for each borrower if they acquire property that secured a debt as satisfaction of the debt or have reason to believe the property has been abandoned.

  2. They must provide:

    1. The lender's name, address, taxpayer identification number, and telephone number (recipient copy only);

    2. The borrower's name, address, taxpayer identification number; and

    3. The individual box information as outlined below.

     

4.6.2.7.6  (08-01-2002)
Who Must File Form 1099–C

  1. (1) The following entities must file Form 1099-C:

    1. A financial institution described in IRC sections 581 or 591(a);

    2. A credit union;

    3. Federal government agencies including: departments, agencies, courts or court administrative offices, and instrumentalities in the executive, judicial, or legislative branches;