Legal Question in Real Estate Law in California

Your post doesn't make any sense. The form isn't taxable, the income on the form is taxable.

A 1099-C is the IRS form a lender uses to report the "forgiveness of debt" that occurs, for example, when the balance due on a note and deed of trust becomes uncollectible because the lender has elected to foreclose by trustee's sale rather than go to court, thus cutting off its right to a deficiency judgment. The deficiency thus surrendered is deemed to be taxable income to the borrower. However, Congress has passed a law suspending the taxability of forgiven debt in certain cases. Here is a summary of the law:

1. The debt forgiven must have been used to buy, build or substantially improve the principle residence and must be secured by that residence (not home equity loans or cash-out refinances unless the money was used to fix up the home. If the home equity line or cash from the cash-out refinance was used to fix up the home then debt forgiven on those loans will qualify as non-taxable under this new law);

2. Debt used to refinance may also be eligible for exclusion, but only up to the amount of the old mortgage principle, just before refinance;

3. The property must be the primary residence of the homeowner (no second homes, investment properties, or business property);

4. The homeowner must have: owned the home for at least 2 years; and lived in the home as their main home for at least two years.

5. The maximum amount of the debt is $2,000,000 or $1,000,000 for a married couple filing separate returns;

6. The debt must be forgiven on or before December 31, 2009; and

7. The debt forgiveness must be related to a decline in: the value of the residence or the financial condition of the homeowner.

There are other rules too, and the average taxpayer is going to need professional help to determine whether the statutory exception applies. I do not know whether the law has been extended to cover debt forgiven in 2010.