1099R

[nrkcmkn]

I received a 1099-R for a home loan that defaulted 14 years ago.   My spouse at the time the loan was defaulted has since divorced with me.  Also, I was only 17 years old when the loan was originally generated in 1999.  It defaulted in 2010, but I have never received any details on it until now.  What are my steps to take?

[JamesG1]

Do you mean a 1099-C or a 1099-A rather than a 1099-R?

If it is a 1099-C, what is the date of identifiable event in box 1? 

Was there ever a personal bankruptcy which addressed this debt?  

Did you actually sign for the debt as a 17-year-old?  

Does your state allow a 17-year-old to sign a promissory note?

You may or may not have qualified principal residence debt.  This Commerce Clearing House website states:

The discharge, before January 1, 2026, of qualified principal residence debt is excluded from gross income. Qualified principal residence debt is any debt incurred by the borrower to purchase, build, or substantially improve the borrower's principal residence. To qualify, the loan must be secured by the principal residence. 

Please provide answers to these questions and someone here will be able to give you guidance.  

However, you also may want to seek competent legal advice. 

[nrkcmkn]

I'm sorry, yes, it was a 1099-C.  The date of identifiable event says 12/31/2023.  This is confusing because the loan defaulted in 2009 and I have not lived there since.  I do not believe you can sign a contract in Texas at 17, however I was married at the time, so not sure if that makes a difference.  Of course, at 17, I did not know these things.  The home was a primary residence up until we defaulted in 2009.  It was not part of a bankruptcy.  We had gotten behind and the company was not willing to work with us, so we surrendered the house.  Nearly 15 years later, this is the first thing I have received about it.  I do not know whether it is legit, where and how it needs to be claimed on taxes, and if it does have to be claimed as income, how does that work if I am no longer married to the other signer on the note.  

[Opus 17]

So this is a really interesting situation.  The short answer is that as long as this was a secured mortgage on your principal residence (your home where you lived most of the time) the forgiven debt is not taxable.  The easiest thing will be to report it as income in the 1099-C interview and then work through the questions to get it excluded.  If you have questions on how to do that, post back here and @JamesG1 can walk you through the specific steps.

The more interesting aspects of this are, 

1. the debt might not even be legal

2. the 1099-C is supposed to be issued as of the date an identifiable event occurs -- that is usually the date the bank decides the debt is uncollectible and formally writes it off in their books.  But under the regulations that existed in the 2010s, if the bank let the debt go more than 3 years without making active attempts to collect, that constituted an identifiable event that required the issuance of a 1099-C.  If the bank never tried to collect the debt, then under those rules, the identifiable event occurred in 2012 or 2013 and the current 1099-C is invalid.  And since the statute of limitations is long past for 2013 income, the 1099-C isn't taxable today or back then.

Since a foreclosure on your main home is declared non-taxable by Congress, the simplest thing is to report it and follow the steps for a foreclosure of your home to make it non-taxable.  My technical arguments don't change your tax situation, although it might be different if the debt was something taxable like a credit card or car loan.  

[nrkcmkn]

Thank you for the information. It's definitely an unusual situation.  I may reach out again when I get ready to file if I need assistance.  Thanks again!