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Debt Defined
A debt is any amount owed to you including stated principal,
stated interest, fees, penalties, administrative costs, and
fines. The amount of debt canceled may be all or only part
of the total amount owed. However, for a lending
transaction, you are required to report only the stated
principal. See Exceptions on page AC-3.
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Exceptions
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2. Interest. You are not required to report interest.
However, if you choose to report interest as part of the
canceled debt in box 2 [of the 1099-C], you must show the
interest separately in box 3.
3. Nonprincipal amounts. For a lending transaction,
you are not required to report any amount other than stated
principal. A lending transaction occurs when a lender loans
money to, or makes advances on behalf of, a borrower
(including revolving credit and lines of credit).
Nonprincipal amounts include penalties, fines, fees, and
administrative costs. However, for a nonlending
transaction, report any of these amounts that are included
in the debt.
This guidance is provided by the IRS to assist parties in
preparing a Form 1099-C.
First, the authoritative sources of Federal tax law are in
the statutes, regulations, and judicial decisions, and not in
informal publications provided by the IRS. Zimmerman v.
Commissioner, 71 T.C. 367, 371 (1978), affd. without published
opinion 614 F.2d 1294 (2d Cir. 1979). Second, petitioners have
not shown the total amount of interest, operation charges, and
penalties that they claim should reduce their outstanding credit
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Last modified: May 25, 2011