@AndrewA87
A 1099-S is issued to the sellers. There is no legal basis to issue a 1099-S to you if you are not on the title, and there is no reason that your son or his ex-spouse should even mention this side arrangement to their closing agent when they sell the home. Even if your son instructs the closing agent to send $16,000 to you directly before dividing the remaining proceeds, that doesn’t make you an owner of the property and there is no reason you should receive a 1099-S.
(A 1099S is a notification to the IRS that a person has sold a home. It doesn’t necessarily mean that any taxes are owed, but whenever a 1099S is issued, it must be addressed on the tax return in some manner. There are several ways you could do this. But even if you are treated as a lender, a lender does not get a 1099S, only the sellers.)
I really think this discussion has gotten out of control, and is ranging into ever more complicated side topics. The plain fact is that if the $16,000 is returned to you, it will never be taxable income, whether it is a gift or a loan. A strict interpretation of IRS regulations might require you to report interest income on the loan, but there is more than a 99% chance that this will never come to the attention of the IRS.
