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Screen 1099C - Cancellation of Debt, Abandonment (1040)
Overview
Use this screen to enter abandonment and canceled debt information. Information in screen will determine how much of the canceled debt is reported on the related 1040 forms and schedules, and indicate the amount of debt, if any, that will be excluded from gross income. Generally, all canceled debt will need to be included in income. However, some canceled debts aren't includible, either in full or partially, in income.
Completion of Form 1099-C Facsimile and Cancellation of Debt data entry sections will produce the Cancellation of Debt Worksheet. Completion of Form
1099-A Facsimile
or Abandoned, Foreclosed, Repossessed Property
data entry sections will produce the Foreclosure and Repossessions Worksheet.note
Fields with a plus sign (
+
) at the end of the field name aren't used in the tax return, but are available for Data Mining in UltraTax CS. You don't need to enter information in fields marked with a plus sign unless the data in the field will be used for data mining purposes. UltraTax CS transfers data to these fields from the Source Data Entry
tool.Source data entry
The UltraTax CS Source Data Entry tool lets you enter data on facsimile versions of forms your clients submit for the preparation of their tax returns. Once the facsimile forms are completed, you can export the data and transfer it into your client data files via the Data Sharing feature.
General Information
Use this section to enter information about the canceled debt, such as how much, if any, is excluded from income, why the amount is excluded from income, and which form or schedule to use for reporting the amount included in income.
Complete these fields before entering data in the
Cancellation of Debt
or Abandoned, Foreclosed, Repossessed Property
sections.Creditor's or Lender's name
This field is mandatory for the
1099C
screen.Unit
This field populates based on the activity.
Form
This field populates based on the activity. For example: For ordinary income, the field contains
BLANK
; for Schedule C, the field contains C
.State
If you're processing a state return, enter a state postal code in this field for proper state processing. Select
F4
from this field to view a list of available state postal codes.1099-C Facsimile
Use this section to enter the cancellation of debt directly from Form 1099-C. If the taxpayer has received more than one Form 1099-C, enter the cancellation of debt information in additional units of this screen.
note
Completion of Form 1099-C Facsimile and Cancellation of Debt data entry sections will produce the Cancellation of Debt Worksheet. Completion of
Form 1099-A Facsimile
or Abandoned, Foreclosed, Repossessed Property
data entry sections will produce the Foreclosure and Repossessions Worksheet.Fields not used in tax preparation
These fields, which have a plus sign (
+
) at the end of the field name, aren't used in the tax return, but are available for Data Mining in UltraTax CS.Amount of debt discharged
Enter the amount reported in Box 2 of Form 1099-C. This is the amount of debt canceled and the amount is reported as income on the related form or schedule unless the amount can be excluded. Either enter
X
in Exclude 100% of cancelled debt from income
, or enter an amount in Box 2 amount excluded from gross income if not 100%
in the Cancellation of Debt
section. Select a reason for exclusion in Reason Box 2 amount is excluded from gross income
.Interest if included in box 2 / Deductible
You can only include non-deductible interest in income (before considering any exceptions and/or exclusions entered in this screen). Deductible interest reduces the amount of debt canceled (before considering any exceptions and/or exclusions entered in this screen). If the forgiven interest reported in Box 3 would have been deductible if the debt was paid, enter
X
in Deductible
. When this field is marked, UltraTax CS will reduce the amount of debt reported in Box 2 by the amount of interest in Box 3, before considering any exceptions and/or exclusions entered in this screen. For details on the forgiven interest, see IRS Publication 525, Taxable and Nontaxable Income.Check here if the debtor was personally liable for repayment of the debt
If this field contains
X
, UltraTax CS transfers the amount reported in Box 7 of the 1099-C Facsimile to calculate Part 1 of the Foreclosure Worksheet.To calculate the Foreclosure Worksheet, the following fields will need to be completed: 1099-C Box 5,
Check here if the borrower was personally liable for repayment of the debt
, 1099-C Box 7, Fair market value of property, Outstanding debt before transfer of property
and Basis of transferred property
. The remaining fields in the 1099-C Facsimile
section should be completed.note
If the
1099C
screen is located in the Income folder and a loss is calculated on the Foreclosure Worksheet, UltraTax CS doesn't report the loss; personal losses are disallowed. See IRS Publication 4681 for more information.Identifiable event code
Enter the code from Form 1099-C, box 6, that identifies the reason for the cancellation of debt, or use the fieldview to make your selection.
If you select code
A
, UltraTax CS marks Exclude 100% of canceled debt from income
and selects code 6
in Reason Box 2 amount is excluded from gross income
. With all other codes, complete the Cancellation of Debt
section.Fair market value of property
UltraTax CS uses this value to calculate the gain or loss due to foreclosure or repossession on the Foreclosure Worksheet, line 2.
Cancellation of Debt
Use this section to exclude and give a reason to exclude any income due to cancellation of debt as indicated from information entered on 1099-C Facsimile. Information from this section is reported on the Cancellation of Debt Worksheet.
Exclude 100% of canceled debt from income
If you enter
X
in this field, the Net Amount in Income column in the Cancellation of Debt Worksheet will be zero. This field is automatically marked if the Identifiable event code
is A
.Box 2 amount excluded from gross income, if not 100%
By default, UltraTax CS includes the total amount of canceled debt in income. Enter the amount, if any, of the canceled debt that's not includible, or fully includible, in income. This amount is reported in the Box 2 Exception/Exclusion Amount column on the Cancellation of Debt Worksheet. Any taxable amount will be reported on the form/schedule indicated in the
Form/Unit
fields.note
- If the amount exceeds the canceled debt reported in Box 2Amount of debt canceled, UltraTax CS defaults to excluding all of the canceled debt from income.
- If Box 3Deductibleis marked, reduce the amount entered in this field by the amount of deductible interest.
Treat canceled debt income as investment income
Enter
X
to treat the amount in 1099-C Facsimile, box 2, as investment income. UltraTax CS reports this amount as other income on Schedule 1, line 8 (Form 1040). Canceled debt income will also be used as investment income on Form 4952 and Form 8960 if this box is marked.Reason Box 2 amount is excluded from gross income
Enter the code if some or all of the canceled debt is being excluded from income. The reason will be reported on the Cancellation of Debt Worksheet to provide an audit trail regarding why an amount was excluded from income.
note
- Code 6 is automatically selected if the Identifiable event code is A.
- When codes 6 through 10 are entered, UltraTax CS marks the corresponding field in the982screen, located in the Other with Return folder. The amount excluded from income (column C of the Cancellation of Debt Worksheet) will be reported on Form 982, line 2. There may be additional data entry required in the982screen for UltraTax CS to properly calculate Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and section 1082 Basis Adjustment).
- The1099Cscreen with codes 1 through 5 entered in this field won't automatically be included on Form 982. If a unit of the1099Cscreen needs to be associated with a related activity when filing Form 982, enter the data in the982screen, located in the Other with Return folder, to properly report this unit.
- Insolvent taxpayers may not exclude an amount of cancelled debt that exceeds the amount by which they are solvent. Taxpayer insolvency can be calculated on the Insolvency Worksheet. If the taxpayer's insolvency isn't calculated using theInsolvescreen, UltraTax CS provides a diagnostic indicating that the amount of cancelled debt should be compared to the amount of insolvency.
Description of other reason
If code 5 (other) is entered in
Reason Box 2 amount is excluded from gross income
, enter the reason the canceled debt is being excluded from income.1099-A Facsimile
Use this section to enter the abandonment directly from the 1099-A. If the taxpayer has received more than one 1099-A, enter the abandonment information in additional units of this screen. If the 1099-C and 1099-A are completed for the same property, UltraTax CS uses the information included on the 1099-C Facsimile to satisfy the reporting requirements of Form 1099-A. See IRS Publication 4681 for more information on reporting requirements for losses from abandonments.
note
The required entries to calculate the Foreclosure Worksheet are amounts in Box 2,
Balance of principal outstanding
, Box 5, Check here if the borrower was personally liable for repayment of the debt
, and Basis of transferred property
. The remaining fields in the 1099-A Facsimile
and Abandoned, Foreclosed, Repossessed Property
sections should be completed.Fields not used in tax preparation
These fields, which have a plus sign (
+
) at the end of the field name, aren't used in the tax return, but are available for Data Mining in UltraTax CS.Date of lender's acquisition or knowledge of abandonment
Enter the date reported in Box 1 on Form 1099-A. UltraTax CS uses the date in Form 1099-A, box 1, in conjunction with the date acquired to calculate the holding period of the property.
Balance of principal outstanding
UltraTax CS transfers this amount to the Foreclosure Worksheet, line 1, if the Foreclosure Worksheet is calculating.
Fair market value of property
Enter the amount reported in Box 4 of Form 1099-A. UltraTax CS transfers this amount to the Foreclosure Worksheet, line 2 if the Foreclosure Worksheet is calculating.
Check here if borrower was personally liable for repayment of the debt
Enter
X
to indicate whether the taxpayer is personally liable for the debt. If X is entered, UltraTax CS uses the amounts reported in Box 2 and Box 4 of the 1099-A Facsimile
to calculate Part 1 of the Foreclosure Worksheet.If X is entered in the box,
C
, E
, F
, or 4835
is indicated in Form
, and a loss is calculated on the Foreclosure Worksheet, UltraTax CS reports the loss on Form 4797, line 10 as an ordinary loss. If the 1099C
screen is located in the Income folder and a loss is calculated on the Foreclosure Worksheet, UltraTax CS doesn't report the loss; personal losses are disallowed. See IRS Publication 4681 for more information.Abandoned, Foreclosed, Repossessed Property
Use this section to report information used to calculate the gain or loss on abandoned, foreclosed, or repossessed property reported on the Foreclosure Worksheet. The information entered in the
1099-C Facsimile
and 1099-A Facsimile
sections will be used in conjunction with information in this section.Date acquired
UltraTax CS uses this date to calculate the holding period of the property to determine if the gain or loss due to foreclosure of repossession is long-term or short-term.
Date property abandoned, repossessed, or disposed
UltraTax CS uses this date to calculate the holding period of the property to determine if the gain or loss due to foreclosure or repossession is long-term or short-term.
Outstanding debt before transfer of property
UltraTax CS transfers this amount to the Foreclosure Worksheet, line 1.
note
If there's data entered in Box 2 of the
1099-A Facsimile
, UltraTax CS enters that amount on the Foreclosure Worksheet, line 1.Basis of transferred property
This amount, in conjunction with the amount in
Depreciation allowed or allowable
, is used to calculate the adjusted basis of the transferred property on the Foreclosure Worksheet line 7.Depreciation allowed or allowable
The depreciation amount in this field should include the amount of any section 179 deduction. UltraTax CS subtracts
Depreciation allowed or allowable
from Basis of transferred property
to calculate the adjusted basis of the property on the Foreclosure Worksheet line 7.Treatment
The information in this field controls where the information appears on Form 4797 or Form 8949. You can either enter these codes directly or select them from the fieldview.
note
If
Treatment
is blank, UltraTax CS automatically determines the treatment. The treatment method used is reported on the Foreclosures and Repossessions Worksheet. When the 1099C input screen is in the Business, Rent & Royalty, Farm, or Farm Rental folder:- UltraTax CS uses treatment code2for all business property when there's only an abandonment of property with no cancellation of debt.
- UltraTax CS uses treatment code3for depreciable property with a holding period greater than 12 months disposed at a gain.
- UltraTax CS uses treatment code1for depreciable property with a holding period greater than 12 months disposed at a loss.
- UltraTax CS uses treatment code1for property with no depreciation if the holding period is greater than 12 months.
- UltraTax CS uses treatment code2if the holding period is less than 12 months.
- UltraTax CS uses theDate property abandoned, foreclosed or repossessed,1099-A Facsimile Box 1, or1099-C Facsimile Box 1fields (in that order) withDate acquiredto calculate the holding period.
When the 1099C input screen is in the Income folder, UltraTax CS uses treatment
L
or S
, depending on the holding period, to report a gain. Personal losses aren't reported on Form 1040.Section 1250 property
Enter
X
to indicate that the asset sold qualifies as section 1250 property. UltraTax CS calculates unrecaptured section 1250 gain and uses the amount in the tax calculation using maximum capital gains rates.Unrecaptured section 1250 gains from Forms 4797 and 6252 transfer to the Unrecaptured Section 1250 Gain Worksheet. This worksheet calculates the total unrecaptured section 1250 gains to be reported on Page 2 of Schedule D.
Business use percentage of property
UltraTax CS defaults to 100 percent for all business activities if the field is left blank.
Property in asset module, don't report Source Data Entry data
When an
X
is entered in this field, all information on the screen is ignored and not reported on the return. Use this field when information was transferred from the Source Data Entry tool for an asset in the asset module. The asset disposal should be entered in the Asset tab.note
If an
X
is entered in this field, UltraTax CS doesn't complete a Foreclosure Worksheet for the unit.