Tax Law (Questions About Taxes)/1099 C

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Question
We were in a real estate partnership with my father in law that was set up as a corporation.  The corporation has been insolvent since 2008.  My father-in-law apparently had taken out a business credit card and it had an outstanding balance.  He settled with the bank that held the credit card for a lower amount.  My husband just received a 1099C for $5356 for the portion of the balance that went unpaid.  

In calling the company, they said that my husband's name and SSN were identified with this loan and that is why he got the 1099.  I asked for a copy of the original application and am waiting for that to arrive but am not holding my breath.  My father-in-law says that they sent it to us because the address they had on the corporation was no longer good and they sent it to who they could find.  He says they are reissuing a 1099C to the corporation since it was an account held by the entity.  

If the corporation does get a 1099C, then are we to be reissued a corrected one?  Can both the corporation and one of the officers be issued a 1099C for the full amount?  Do we ignore this as it is not an account we personally applied for or signed for or ever had any dealing with (we were not involved or aware of the settlement negotiations)?  To complicate matters, my husband and father-in-law share the same name, so mixups are a frequent occurrence.

Answer
Christine,

If the card was in the name of the corporation, you should not be responsible for any debts of the Corp, **unless** you provided a personal guarantee on behalf of the Corp. I am sure of the laws in your state however.

The bank should issue a voided 1099-C when they send one to the Corp. If they don't your best bet is to report the CoD, then back it out with an explanation attached to te return.

Something smells fishy. Can you be sure that the father-in-law didn't take out the application using your husbands name?

Keep me advised.....  

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Bruce W. Tyler, EA

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I can answer questions with regard to the following: Preparation/Tax Law regarding Individual Income Tax (IRS and California), Audit Representation/IRS Procedures of personal and corporate income tax including appeals, IRS Collection procedures for individuals, partnerships and corporations, Offers-in-Compromise, Installment Payment Plans, Penalty Abatement,Income from Cancellation of Debt. Heavy experience with Public Safety (i.e. Firefighters, Police Officers, Correctional Officers, etc) as well as medical industry.

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