Co-Signer 1099C

[Patrick Michael]

Why does it seem I always get this odd ball situations that I have never dealt with before late in the season!

Mother co-signed for her daughter on a car loan. Daughter defaulted and loan was forgiven.  Both mother and daughter received a 1099-C. My research led me to Treasury Regulation Sec. 1.6050P-1(7) that says that for purposes of filing, "a guarantor is not a debtor."  Mother has tried to get the creditor to correct the 1099-C but they refuse. 

Is this another case where I should include the income on line 21 and then back it out on line 21 with an explanation that the 1099-C was issued in error to avoid a CP2000 notice? 

Thanks.

[ILLMAS]

For the same amount or half and half and different SS#?

[ILLMAS]

For the same amount or half and half and different SS#?

[Patrick Michael]

Same amount on both, one in the mother's SSN and the other in the daughters SSN. 

[Catherine]

I'd put it on Line 21 with a back-out also on Line 21.  Since you've already looked up the regs, have a pdf in the client folder ready for if/when the CP2000 notice comes.

[Pacun]

File form 982 if they were insolvent. They were liable for the whole amount each and they were both forgiven that amount. Creditor is correct and there is no way the creditor will bend the rules. Let's say that the daughter was insolvent, then she files 982 and she is off the hook. If the mother was solvent, she will have two choices, to pay for the debt or pay taxes on the debt forgiven.

 

[ILLMAS]

2 hours ago, Patrick Michael EA said:

Same amount on both, one in the mother's SSN and the other in the daughters SSN. 

This stinks, imagine if mother and daughter go to a different preparer they both pay taxes for the same amount   Knowing the IRS they might want for your client to contact the creditor and to correct the 1099-C to the proper person.

[Pacun]

They both were responsible for the full amount and each saved money by not paying (yes, don't sign for anyone). You are right, one can pay the creditor and take both off the hook or they both can pay taxes on that amount.