IRS Form 1099-A, Acquisition or Abandonment of Secured Property, is commonly used in real estate and lending transactions involving foreclosures or the voluntary surrender of property. One of the most frequently asked questions is: Who actually receives this form? Understanding who receives Form 1099-A is key to knowing who must report the related transaction on their tax return.
Primary Recipient: The Borrower
The borrower—the individual or business that took out the loan secured by property—is the main recipient of Form 1099-A. If the borrower defaults on the loan and the lender either forecloses on the property or the borrower abandons it, the lender must file Form 1099-A and send a copy to the borrower.
Borrowers receive this form because the IRS considers foreclosure or abandonment as a disposition of property. This event may have tax consequences, such as a capital gain or loss, or income from debt forgiveness (which may also be reported on a separate Form 1099-C).
Why the Borrower Receives It
The borrower receives Form 1099-A so they can:
- Report any gain or loss on the “sale” of the property.
- Determine if they have cancellation of debt income (if also issued Form 1099-C).
- Comply with IRS reporting requirements related to foreclosures or abandonment.
Borrowers use the information from Form 1099-A—such as the date of transfer, the outstanding principal, and the fair market value—to complete Form 8949 and Schedule D when filing their tax return.
Lender’s Filing Responsibility
The lender or financial institution that holds the loan is responsible for preparing and filing Form 1099-A with the IRS. They must also provide a copy to the borrower by January 31 of the year following the foreclosure or abandonment.
In some cases, if multiple lenders are involved (such as in a loan servicer arrangement), the party who actually acquired the property or oversaw the abandonment is the one who files the form.
Conclusion
Form 1099-A is primarily received by the borrower whose property was foreclosed on or abandoned. It provides essential tax information that must be reported to the IRS. If you’ve received this form, it’s crucial to understand its implications and how it affects your federal tax return.
If you are unsure, reach out to Dimov Tax today. We are ready to present professional aid.