A Little About 1099s: Types of 1099s (1099-A thru 1099-C)

This is an excerpt of a presentation I’ve given to businesses about Form 1099.

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Let’s start with the different types of 1099s and what they are used for.

Forms 1099-A and 1099-C

Form 1099-A, “Acquisition and Abandonment of Secured Property” is used when lenders repossess property from borrowers. For example, a bank repossessing a house during a foreclosure.

Form 1099-C is used by lenders when they cancel or forgive debt to a borrower. For example, a bank will issue Form 1099-C when it forgives an outstanding mortgage balance during a foreclosure.

Coordination

There is sometimes confusion among lenders about when to issue Form 1099-A versus a 1099-C. There is also confusion among practitioners and taxpayers about how to report receipt of these forms on a taxpayer’s tax return.

Form 1099-A is issued when a lender repossesses property from a taxpayer. The outstanding debt on the property may or may not be forgiven at the time of repossession. Form 1099-C should be issued when the debt is actually canceled. If the repossession and debt cancellation take place in the same year, only a Form 1099-C needs issued.

When a taxpayer receives a 1099-A, it should generally be reported as a deemed sale. When a taxpayer receives a 1099-C, it may result in cancellation of debt income and possibly a deemed sale as well. More on this topic in future parts.

Form 1099-B, Proceeds from Broker and Barter Exchange Transactions

Form 1099-B is used to report sales of stocks, bonds, commodities, mutual fund transactions, etc.

The rules regarding Form 1099-B and stock transactions changed in 2011. Brokerages are now required to track a stockholder’s basis. I’ll go into more detail about Form 1099-B and proper reporting, in a later part.

Form 1099-CAP – Changes in Corporate Control and Capital Structure

This form is issued to shareholders in cases where a corporation has undergone a change in control or capital structure and the shareholder needs to recognize a gain from receipt of stock or cash in the transaction. The instructions to Form 1099-CAP state the following:

A domestic corporation that is required to file Form 8806, Information Return for Acquisition of Control or Substantial Change in Capital Structure, must file Form 1099-CAP and furnish a copy to each shareholder who receives cash, stock or other property as a result of the acquisition of control or substantial change in capital structure and who is not an exempt recipient.

Many exceptions apply, including an exception that says Form 1099-CAP need not be filed unless the stock is valued at $100 million or more.

Most people will never encounter a 1099-CAP in their lifetime. I’ve seen a lot of oddball things in my career, but I’ve never encountered this form. If you’d like more information, consult the instructions to Form 1099-CAP, which can be found at the IRS website.

Coming up in Part 2, we’ll continue our tour of 1099s with Forms 1099-DIV through 1099-K.