Cancellation of indebtedness information returns.

AuthorNevius, Alistair M.

The Service has issued final, temporary, and proposed regulations regarding information returns for cancellation of indebtedness by certain entities (T.D. 9430; REG-118327-08). The regulations are designed to avoid premature reporting by certain entities that are currently required to file information returns and to reduce the number of returns required to be filed. The regulations were effective November 10, 2008.

Sec. 6050P requires certain entities to file information returns with the IRS and to furnish information statements to debtors, reporting discharges of indebtedness of $600 or more. Sec. 6050P originally applied only to financial institutions, credit unions, and federal executive agencies. These "applicable financial institutions" were required, under regulations released in 1996, to issue Forms 1099-C, Cancellation of Debt, whenever certain identifiable events occurred.

The 1996 regulations also instituted a "36-month rule," which created a rebuttable presumption that if a creditor had not received a payment on a loan in 36 months, it was required to issue Form 1099-C.

Subsequent legislation expanded Sec...

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