Q: I am the creditor and I canceled the debt (the amount owned by a real estate development company). I have provided a 1099-C to the real estate development company. Please advice what other actions I must take: (a) Do I have to inform IRS that I have forgiven debt as a creditor… if yes then how (b) How and where do I take the amount of debt as some kind of loss on my tax return, (c) what supporting documents must I attach with my tax return as an evidence that I am indeed taking a valid business loss.

A: Once you’ve issued the FORM 1099-C you have done your part.  In issuing the 1099-C to the client, you should of also submitted a copy of the FORM 1099-C to the IRS along with a FORM 1096.  The amount of your loss is determined by whether or not you regained possession of the asset i.e. land, equipment etc. and what is the fair market value asset in comparison the the debt cancelled.  Where to report the loss is determined by what entity is filing the tax return ie. Individual or Business.  Be sure to advise your CPA or shoot me an email:

John Engerman is a CPA based in the Washington D.C Metro area. He is the founder of The aRi Group, LLC – The Premier Financial Solutions Provider.