1099-C Form Discharge of Bad Debt from 2017

[tatencio]

I'm doing my 2017 taxes and have a 1099-C form, a person I know is a used car dealer. He bought the car and sold it, now I'm being taxed, what can I do before I file?

[NCperson]

that 1099-C form normally comes from the lender and represents the amount the lender  forgave which is taxable income to you.

What does the used car dealer have to do with the transaction? can you explain what happened here?  Do you not pay off the debt? how did the car end up in the dealer's hands?

If he bought it from you, what did you do with the cash? How did he buy it from you if (presumably) the lender held the title? Or did the cash go to the lender to pay down the existing loan and the 1099-C reflects the wasn't paid? 

not sure there is anything to do but report the 1099-C as income, but I'd like to understand the fuller picture first. 

[tatencio]

I was late on the payments and the used car dealer paid the total amount to the lender (Santander), so I could get out from under the loan.

I had no clue I would get taxed on the debit, so YES the payment went directly to the lender and the title came to me and I signed it over to the used car dealer. Thought I was just getting rid of a debt.

I assume at the end of the day, I'm filing the 1099-C form and ultimately being taxed as if I paid the whole amount off with money I had or acquired or anything as far as the gov. is concerned?

[NCperson]

Something does not make sense and suggest calling Santander to understand what is going on

If the dealer paid the loan off, including the missing payments in full, there should be no 1099-c

But if the dealer “cut a deal” with Santander to pay less that what was due in return for sending the title to you, that difference is taxable income to you. From what you are explaining sounds likely this occurred

But then again, maybe Santander made a mistake!

Best to call them and understand why they issued the 1099-c. If you agree they were correct, it is taxable income to you.

[tatencio]

Thank you very much for your responses!