Is this accurate?

[FoolOnTheHill]

What is the name of your state? IN

I'm not sure if this is a state specific question but here goes. I recently read this statement on another forum and I'm wondering if it's accurate:

A guy gets an auto loan for $40,000. He makes $25,000 in payments and then becomes disabled and unable to pay the remainder. The bank repos the vehicle, sells it for $10,000 leaving them $5000 in the hole. The bank discharges the $5000 as the cost of doing business. The bank then mails the original lessee a 1099-C in the amount of $5000 which obligates him to claim it as income on his taxes.

Is this accurate info?

 

[seniorjudge]

What is the name of your state? IN

I'm not sure if this is a state specific question but here goes. I recently read this statement on another forum and I'm wondering if it's accurate:

A guy gets an auto loan for $40,000. He makes $25,000 in payments and then becomes disabled and unable to pay the remainder. The bank repos the vehicle, sells it for $10,000 leaving them $5000 in the hole. The bank discharges the $5000 as the cost of doing business. The bank then mails the original lessee a 1099-C in the amount of $5000 which obligates him to claim it as income on his taxes.

Is this accurate info?

This is pretty strange. I am subscribing to this thread to find out the answer. Sorry I do not know!

 

[passingby]

not a lawyer, but

Unfortunately that is correct. Any amount over $500 that the creditor assumes a loss for is conversely assumed to be income for the debtor. This applies to those darned Credit Solution companies too when they make "deals" with your creditors for you.

 

[Veronica1228]

Form 1099-C Cancellation of Debt

File form 1099-C, Cancellation of debt for each debtor for which you cancelled (or discharged) a debt owed to you of $600 or more and you are a financial institution, a credit union, or a Federal Government agency. You must file even though debtor may not be subject to tax on the cancelled debt. That is, you are not required to determine whether the debtor qualifies for exclusion under section 108, or example, debts discharged in bankruptcy are reportable.

I found the above passage by doing a search using 1099-C on the internet.

 

[FoolOnTheHill]

In retrospect, I guess I could've googled 1099-C as well. Thanks for your replies, though.

 

[seniorjudge]

Form 1099-C Cancellation of Debt

File form 1099-C, Cancellation of debt for each debtor for which you cancelled (or discharged) a debt owed to you of $600 or more and you are a financial institution, a credit union, or a Federal Government agency. You must file even though debtor may not be subject to tax on the cancelled debt. That is, you are not required to determine whether the debtor qualifies for exclusion under section 108, or example, debts discharged in bankruptcy are reportable.

I found the above passage by doing a search using 1099-C on the internet.

Thanks. I learned something.

More reasons why I let my trusty CPA take care of the crunching....

 

[Veronica1228]

Thanks. I learned something.

More reasons why I let my trusty CPA take care of the crunching....

Scary. I work with CPAs every day on Corporate taxes, payroll taxes, unemployment taxes, etc, and half the time I have to explain the IRS rules to them. I do my OWN taxes!

To the OP, you're welcome.