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1099-C thread got me thinking


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So reading the thread about getting a 1099-C from a JDB got me thinking.

Has anyone received one from a JDB they beat? I'm assuming since they couldn't prove ownership at trial they can't submit a 1099-C?

Can a JDB who now shows as owner of a debt from an OC file 1099-C if the never attempt suit?

I did get a 1099-C for a car I co-signed for an ex but that was an OC essentially.

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I don't know if you can find the thread...I'm pretty sure its from at least 4 or 5 years ago...and I think it was DiveMedic.

 

He was sued by a JDB...had the case dismissed with predjudice...and then the JDB sent him a 1099c.  The IRS and tax court held him responsible for the taxes even though the civil court didn't declare it was his debt.

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That is another example of why anyone in this predicament should go through their state's Attorney General's office because trying to talk any sense to the IRS is a lost cause.  Not to mention causing the Attorney General to knock on a JDB's door has to be one hell of an intimidation technique!  Get your Attorney General involved immediately upon receiving the 1099 while there is still some time before the tax filing deadline or else you will have to pay it and file an amended return to get it back.

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  • 2 weeks later...

I not worried about Midland since they couldn't prove they owned the debt. If they file a 1099-C for a debt they don't own I'll own them.

I'm more intrested in the OC filing one for a debt they sold to JDB. When they sell it I'd assume they gave up their rights to it.

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I not worried about Midland since they couldn't prove they owned the debt. If they file a 1099-C for a debt they don't own I'll own them.

I'm more intrested in the OC filing one for a debt they sold to JDB. When they sell it I'd assume they gave up their rights to it.

I didn't know my Mother had a judgment against her.  Eventually she got a 1099-C from Chase and I learned about it from filing her taxes.  I went to the courthouse to figure out what the judgment was about.  Looking through the file for the case I notice a transfer of the judgment over to a JDB.  I got a copy of transfer and sent it with her Taxes to the IRS.  Never heard from the IRS after that.

 

IMO the bank has no right to issue a 1099-C as they don't own the debt and therefore cannot forgive it.  Why should the OC get a double write off.  Sell the debt and take a loss and again forgive the debt by issuing the 1099-C.

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IMO the bank has no right to issue a 1099-C as they don't own the debt and therefore cannot forgive it.  Why should the OC get a double write off.  Sell the debt and take a loss and again forgive the debt by issuing the 1099-C.

The whole 1099c thing is still a moving target, but...

 

The purpose of issuing a 1099c is to make sure the debtor pays taxes on the "found income".  Yes, the OC has already taken a "loss against accrued income" when the account was charged off, and maybe an additional loss if they continue to accrue interest and penalties as income up until the time they sell it, minus any income they do get from the sale...but they get no additional benefit from the 1099c.  They are not getting a double write off.

 

And, technically, according to the IRS rules, the debtor is required to claim the found income whether they get a 1099c or not.  So, if you do settle with a JDB for less than the amount the OC wrote off, you owe taxes on the difference.

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The whole 1099c thing is still a moving target, but...

The purpose of issuing a 1099c is to make sure the debtor pays taxes on the "found income". Yes, the OC has already taken a "loss against accrued income" when the account was charged off, and maybe an additional loss if they continue to accrue interest and penalties as income up until the time they sell it, minus any income they do get from the sale...but they get no additional benefit from the 1099c. They are not getting a double write off.

And, technically, according to the IRS rules, the debtor is required to claim the found income whether they get a 1099c or not. So, if you do settle with a JDB for less than the amount the OC wrote off, you owe taxes on the difference.

My question was more about the fact that I beat the JDB at trial with a judgement in my favor. So JDB has no right to the debt, so no 1099C from them, correct. But can the OC claim a loss on debt they sold? Wouldn't the sale be the end of their rights to the debt?
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Did you actually get a judgement in your favor, or was the JDB's request for a judgement denied?  There is a difference.

 

The problem is civil law and tax law don't have to agree.  According to tax law, the OC should send out a 1099c when they "give up" on the debt...and the OC writes off the debt (minus what they sold it for).  The debtor should pay taxes at that time.  Then, if the debtor turns around and pays the JDB, the debtor can try to get their money back from the IRS. 

 

There have been some discussions on the board here about whether a JDB has the right to issue a 1099c and claim the subsequence loss on their books at tax time.  The consensus is no...a 1099c should only come from the OC.  But, I don't recall any actual case law or IRS ruling to that effect.

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Charge off as defined by blacks law dictionary is an accounting term where one item is eliminated from an assets list when it is lost or is deemed to be worthless.

If an OC sells an account they also sell the rights, and cannot file a 1099c. They can file a 1099c if they still own the debt, but if they sell it then the jdb who buys it cannot file a 1099c on the same debt.

 

The IRS codes state that entities involved in the lending of money are the ones who are actually REQUIRED to file a 1099c, but the IRS code gives no specific mention as to whom can voluntarily file a 1099c

 

If the OC has filed a 1099c and then sells it the buyer of that debt cannot also file a 1099c on the same debt.

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Charge off as defined by blacks law dictionary is an accounting term where one item is eliminated from an assets list when it is lost or is deemed to be worthless.

We've been over this before.  In the context of credit reporting, charge off only means "charge against accrued income for profit and loss" purposes.  The OC still owns, the OC still carries it on their books, the debtor still owes it, and the account can continue to accrue interest and penalities.  The account is not worthless.

 

Now, in the context of an FDIC Insurred lender, the term "write off" applies to an FDIC rule (NOT law) that says the lender should write off, as "non-performing" any account that is 180 days past due. 

 

As for whether or not an OC is required to issue a 1099c for a sold debt...read http://www.irs.gov/pub/irs-pdf/i1099ac.pdf  My gibberish to english translator says the 1099c must come from the OC if they sell it.

 

 

 

Unfortuneatly, CRAs accept the coding for CO and WO interchangibily, but we have no evidence that FDIC rules apply to the CC issuing subsidiaries of banks.

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I have a judgment in favor of defendant on the books vs Midland. Not a monetary settlement for dismissal or dissmissal prior to trial.

Here is a scan of the actual doc https://docs.google.com/file/d/0B3pn_2wRVGfTenExTW1DajZDTGM/edit?usp=docslist_api

On my credit report it is written "transferred to another office, sold to another lender" from the OC. So OC clearly state they sold it and JDB lost by judgement. To me that seems to mean nobody can claim it.

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