A lender issues the Form 1099-A, Acquisition or Abandonment of Secured Property when the lender receives an interest in the property that was on the full or partial satisfaction of the debt, else if the lender got some reason to know more about that the property has been abandoned. Here, the property refers to a real property, tangible personal property, and any intangible property.
The Form 1099-A is not for reporting the tangible personal property such as the car, which is held for personal use. No need to report a property, if it is located outside the United States and when you, being a borrower has submitted the lender a statement that shows you are an exempt foreign person.
On the Form 1099-A, you can find the amount of the debt owed reported by the lender and the market value of the property on the date of acquisition or abandonment of the property. As a debtor, you can have these values to calculate the gain or loss on the nature of the property. You can report the gain or loss on the Form 1040, Schedule D, Capital Gains and Losses or on the Form 8949, Sales and Other Dispositions of Capital Assets, when the property is not used for business or on the Form 4797, Sales of Business Property, when the property is used for business.
More about the Foreclosure
Form 1099-A information should properly report the foreclosure on the tax return. A foreclosure is considered as the sale of property, and the former property owner calculates the gain or loss on the property. Here there is no selling price for the normal sale. The information from the Form 1099-A becomes relevant now.
Based on the rule to calculate the tax consequences of the foreclosure, a person needs to check out the selling price of the property, such that the gain or loss of the property can be calculated. Based on the loan type, the taxpayer has to use the fair market value of the property or the outstanding loan balance for the selling price of the property. Both of the values, outstanding loan balance, fair market value of the property is informed on the Form 1099-A. Additionally, the date of the foreclosure is in Form 1099-A and this is used as the disposed of the date of the property.
Cancellation of Debt
When you are borrowing money, you no need to add the loan in the gross income as you have an obligation to repay the lender in future. When the lender cancels the obligation, you can include the amount of that canceled debt in gross income. When a commercial lender cancels the debt, the lender will issue a Form 1099 C, Cancelation of Debt, in order to report the cancellation.