Form 1099-C - Cancellation of Debt

2014

Department of the Treasury
Internal Revenue Service

Instructions for Forms
1099-A and 1099-C

Acquisition or Abandonment of Secured Property and Cancellation of Debt
Section references are to the Internal Revenue Code
unless otherwise noted.

Future Developments

For the latest information about developments related to
Forms 1099-A and 1099-C and their instructions, such as
legislation enacted after they were published, go to
www.irs.gov/form1099a and www.irs.gov/form1099c.

What's New

Property

Truncating Borrower's/Debtor's identification number on paper payee statements. Pursuant to proposed
regulations § 301.6109-4 (REG-148873-09), all filers of
Forms 1099-A and 1099-C may truncate a borrower's or
debtor's identification number (social security number
(SSN), individual taxpayer identification number (ITIN), or
adoption taxpayer identification number (ATIN)) on payee
statements. See part M in the 2014 General Instructions
for Certain Information Returns.

Reminder

In addition to these specific instructions, you should also
use the 2014 General Instructions for Certain Information
Returns (Forms 1097, 1098, 1099, 3921, 3922, 5498, and
W-2G). Those general instructions include information
about the following topics.
Who must file (nominee/middleman).
When and where to file.
Electronic reporting requirements.
Corrected and void returns.
Statements to recipients.
Taxpayer identification numbers.
Backup withholding.
Penalties.
Other general topics.
You can get the general instructions from www.irs.gov/
form1099a or www.irs.gov/form1099c or by calling
1-800-TAX-FORM (1-800-829-3676).

Specific Instructions for Form 1099-A

File Form 1099-A, Acquisition or Abandonment of
Secured Property, for each borrower if you lend money in
connection with your trade or business and, in full or
partial satisfaction of the debt, you acquire an interest in
property that is security for the debt, or you have reason to
know that the property has been abandoned. You need
not be in the business of lending money to be subject to
this reporting requirement.

Coordination With Form 1099-C

If, in the same calendar year, you cancel a debt in
connection with a foreclosure or abandonment of secured

Nov 07, 2013

property, it is not necessary to file both Form 1099-A and
Form 1099-C, Cancellation of Debt, for the same debtor.
You may file Form 1099-C only. You will meet your Form
1099-A filing requirement for the debtor by completing
boxes 4, 5, and 7 on Form 1099-C. However, if you file
both Forms 1099-A and 1099-C, do not complete boxes
4, 5, or 7 on Form 1099-C. See the instructions for Form
1099-C, later.
Property means any real property (such as a personal
residence), any intangible property, and tangible personal
property except:

No reporting is required for tangible personal property
(such as a car) held only for personal use. However, you
must file Form 1099-A if the property is totally or partly
held for use in a trade or business or for investment.
No reporting is required if the property securing the loan
is located outside the United States and the borrower has
furnished the lender a statement, under penalties of
perjury, that the borrower is an exempt foreign person
(unless the lender knows that the statement is false).

Who Must File

In addition to the general rule specified above, the
following rules apply.
Multiple owners of a single loan. If there are multiple
owners of undivided interests in a single loan, such as in
pools, fixed investment trusts, or other similar
arrangements, the trustee, record owner, or person acting
in a similar capacity must file Form 1099-A on behalf of all
the owners of beneficial interests or participations. In this
case, only one form for each borrower must be filed on
behalf of all owners with respect to the loan. Similarly, for
bond issues, only the trustee or similar person is required
to report.
Governmental unit. A governmental unit, or any of its
subsidiary agencies, that lends money secured by
property must file Form 1099-A.
Subsequent holder. A subsequent holder of a loan is
treated as a lender and is required to report events
occurring after the loan is transferred to the new holder.
Multiple lenders. If more than one person lends money
secured by property and one lender forecloses or
otherwise acquires an interest in the property and the sale
or other acquisition terminates, reduces, or otherwise
impairs the other lenders' security interests in the
property, the other lenders must file Form 1099-A for each
of their loans. For example, if a first trust holder forecloses
on a building, and the second trust holder knows or has
reason to know of such foreclosure, the second trust

Cat. No. 27991U

Box 2. Balance of Principal Outstanding

holder must file Form 1099-A for the second trust even
though no part of the second trust was satisfied by the
proceeds of the foreclosure sale.

Enter the balance of the debt outstanding at the time the
interest in the property was acquired or on the date you
first knew or had reason to know that the property was
abandoned. Include only unpaid principal on the original
debt. Do not include accrued interest or foreclosure costs.

Abandonment

An abandonment occurs when the objective facts and
circumstances indicate that the borrower intended to and
has permanently discarded the property from use. You
have “reason to know” of an abandonment based on all
the facts and circumstances concerning the status of the
property. You will be deemed to know all the information
that would have been discovered through a reasonable
inquiry when, in the ordinary course of business, you
become aware or should become aware of circumstances
indicating that the property has been abandoned. If you
expect to commence a foreclosure, execution, or similar
sale within 3 months of the date you had reason to know
that the property was abandoned, reporting is required as
of the date you acquire an interest in the property or a
third party purchases the property at such sale. If you
expect to but do not commence such action within 3
months, the reporting requirement arises at the end of the
3-month period.

Box 3. Reserved
Box 4. Fair Market Value (FMV) of Property

For a foreclosure, execution, or similar sale, enter the
FMV of the property. See Temporary Regulations section
1.6050J-1T, Q/A-32. Generally, the gross foreclosure bid
price is considered to be the FMV. If an abandonment or
voluntary conveyance to the lender in lieu of foreclosure
occurred and you placed an “X” in the checkbox in box 5,
enter the appraised value of the property. Otherwise,
make no entry in this box.

Box 5. Was Borrower Personally Liable for
Repayment of the Debt

If the borrower was personally liable for repayment of the
debt at the time the debt was created or, if modified, at the
time of the last modification, enter an “X” in the checkbox.

Statements to Borrowers

If you are required to file Form 1099-A, you must provide a
statement to the borrower. Furnish a copy of Form 1099-A
or an acceptable substitute statement to each borrower.
For more information about the requirement to furnish a
statement to the borrower, see part M in the 2014 General
Instructions for Certain Information Returns.

Box 6. Description of Property

Enter a general description of the property. For real
property, generally you must enter the address of the
property, or, if the address does not sufficiently identify
the property, enter the section, lot, and block.
For personal property, enter the applicable type, make,
and model. For example, describe a car as “Car—2010
Honda Accord.” Use a category such as “Office
Equipment” to describe more than one piece of personal
property, such as six desks and seven computers. Enter
“CCC” for crops forfeited on Commodity Credit
Corporation loans.

Account Number

The account number is required if you have multiple
accounts for a borrower for whom you are filing more than
one Form 1099-A. Additionally, the IRS encourages you
to designate an account number for all Forms 1099-A that
you file. See part L in the 2014 General Instructions for
Certain Information Returns.

Specific Instructions for Form 1099-C

Box 1. Date of Lender's Acquisition or
Knowledge of Abandonment

The creditor's phone number must be provided in
the creditor's information box. It should be a
CAUTION
central number for all canceled debts at which a
person may be reached who will insure the debtor is
connected with the correct department.

For an acquisition, enter the date you acquired the
secured property. An interest in the property generally is
acquired on the earlier of the date title is transferred to the
lender or the date possession and the burdens and
benefits of ownership are transferred to the lender. If an
objection period is provided by law, use the date the
objection period expires. If you purchase the property at a
sale held to satisfy the debt, such as at a foreclosure or
execution sale, use the later of the date of sale or the date
the borrower's right of redemption, if any, expires.

!

Do not file Form 1099-C when fraudulent debt is
canceled due to identity theft. Form 1099-C is to
CAUTION
be used only for cancellations of debts for which
the debtor actually incurred the underlying debt.

!

File Form 1099-C, Cancellation of Debt, for each
debtor for whom you canceled a debt owed to you of $600
or more if:
1. You are an entity described under Who Must File,
below, and
2. An identifiable event has occurred. It does not
matter whether the actual cancellation is on or before the
date of the identifiable event. See When Is a Debt
Canceled, later.

For an abandonment, enter the date you knew or had
reason to know that the property was abandoned unless
you expect to commence a foreclosure, execution, or
similar action within 3 months, as explained earlier. If a
third party purchases the property at a foreclosure,
execution, or similar sale, the property is treated as
abandoned, and you have reason to know of its
abandonment on the date of sale.

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Instructions for Forms 1099-A and 1099-C (2014)

!

CAUTION

Form 1099-C must be filed regardless of whether
the debtor is required to report the debt as
income.

Safe harbor rules. The three safe harbor rules in which
an entity will not be considered to have a significant trade
or business of lending money are:
1. No prior year reporting required. An organization
will not have a significant trade or business of lending
money for the current year if the organization was not
required to report in the prior year and if its gross income
from lending money in the most recent test year (see item
3, below) is less than both 15% of the organization's gross
income and $5 million.
2. Prior year reporting requirement. An organization
that had a prior year reporting requirement will not have a
significant trade or business of lending money for the
current year if, for each of the 3 most recent test years, its
gross income from lending money is less than both 10%
of the organization's gross income and $3 million.
3. No test year. Newly formed organizations are
considered not to have a significant trade or business of
lending money even if the organization lends money on a
regular and continuing basis. However, this safe harbor
does not apply to an entity formed or availed of for the
principal purpose of holding loans acquired or originated
by another entity. In this instance, the transferee entity
(including real estate mortgage investment conduits
(REMICs) and pass-through securitized indebtedness
arrangements) may be required to report cancellation of
indebtedness on Form 1099-C. See Regulations section
1.6050P-1(e)(5).

The debtor may be an individual, corporation,
partnership, trust, estate, association, or company.
Do not combine multiple cancellations of a debt to
determine whether you meet the $600 reporting
requirement unless the separate cancellations are under a
plan to evade the Form 1099-C requirements.

Coordination With Form 1099-A

If, in the same calendar year, you cancel a debt of $600 or
more in connection with a foreclosure or abandonment of
secured property, it is not necessary to file both Form
1099-A, Acquisition or Abandonment of Secured
Property, and Form 1099-C for the same debtor. You may
file Form 1099-C only. You will meet your Form 1099-A
filing requirement for the debtor by completing boxes 4, 5,
and 7 on Form 1099-C. However, you may file both Forms
1099-A and 1099-C; if you do file both forms, do not
complete boxes 4, 5, or 7 on Form 1099-C. See the
instructions for Form 1099-A, earlier, and Box 4, Box 5,
and Box 7, later.

Who Must File

File Form 1099-C if you are:
1. A financial institution described in section 581 or
591(a) (such as a domestic bank, trust company, building
and loan or savings and loan association).
2. A credit union.
3. Any of the following, its successor, or subunit of one
of the following:
a. Federal Deposit Insurance Corporation,
b. Resolution Trust Corporation,
c. National Credit Union Administration,
d. Any other federal executive agency, including
government corporations,
e. Any military department,
f. U.S. Postal Service, or
g. Postal Rate Commission.
4. A corporation that is a subsidiary of a financial
institution or credit union, but only if, because of your
affiliation, you are subject to supervision and examination
by a federal or state regulatory agency.
5. A Federal Government agency including:
a. A department,
b. An agency,
c. A court or court administrative office, or
d. An instrumentality in the judicial or legislative
branch of the government.
6. Any organization whose significant trade or
business is the lending of money, such as a finance
company or credit card company (whether or not affiliated
with a financial institution). The lending of money is a
significant trade or business if money is lent on a regular
and continuing basis. Regulations section 1.6050P-2(b)
lists three safe harbors under which reporting may not be
required for the current year. See Safe harbor rules next.
Instructions for Forms 1099-A and 1099-C (2014)

Test year defined. A test year is a tax year of the
organization that ends before July 1 of the previous
calendar year. For example, X, a calendar year taxpayer
who has a significant trade or business of lending money,
is formed in year one. X will not have a test year in year
one or year two. However, for year three, X's test year will
be year one. In year three, year one is the only year that
ended before July 1 of the previous calendar year (in this
example, year two).
Penalties. There are penalties for failure to file correct
information returns by the due date and for failure to
furnish correct payee statements. See part O in the 2014
General Instructions for Certain Information Returns for
details.
Exceptions. Until further guidance is issued, no
penalty will apply for failure to file Form 1099-C, or provide
statements to debtors, for amounts:
Discharged in nonlending transactions, or
Forgiven pursuant to the terms of a debt obligation.
Multiple creditors. If a debt is owned (or treated as
owned for federal income tax purposes) by more than one
creditor, each creditor that is described under Who Must
File, earlier, must issue a Form 1099-C if that creditor's
part of the canceled debt is $600 or more. A creditor will
be deemed to have met its filing requirements if a lead
bank, fund administrator, or other designee of the creditor
complies on its behalf. The designee may file a single
Form 1099-C reporting the aggregate canceled debt or
may file Form 1099-C for that creditor's part of the
canceled debt. Use any reasonable method to determine
the amount of each creditor's part of the canceled debt.

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a mortgage lender or holder who is barred by local law
from pursuing debt collection after a “power of sale” in the
mortgage or deed of trust is exercised. Enter “D” in Box 6
to report this identifiable event.
5. A cancellation or extinguishment making the debt
unenforceable under a probate or similar proceeding.
Enter “E” in Box 6 to report this identifiable event.
6. A discharge of indebtedness under an agreement
between the creditor and the debtor to cancel the debt at
less than full consideration (for example, short sales).
Enter “F” in Box 6 to report this identifiable event.
7. A discharge of indebtedness because of a decision
or a defined policy of the creditor to discontinue collection
activity and cancel the debt. A creditor's defined policy
can be in writing or an established business practice of
the creditor. A creditor's established practice to stop
collection activity and abandon a debt when a particular
nonpayment period expires is a defined policy. Enter “G”
in Box 6 to report this identifiable event.
8. The expiration of non-payment testing period. This
applies only to entities described in numbers 1, 2, 3, or 4
under Who Must File, earlier. This event occurs when the
creditor has not received a payment on the debt during
the testing period. The testing period is a 36-month period
ending on December 31, plus any time when the creditor
was precluded from collection activity by a stay in
bankruptcy or similar bar under state or local law. Enter
“H” in Box 6 to report this identifiable event.
The creditor can rebut the occurrence of this
identifiable event if:
a. The creditor (or a third party collection agency on
behalf of the creditor) has engaged in significant bona fide
collection activity during the 12-month period ending on
December 31, or
b. Facts and circumstances that exist on January 31
following the end of the 36-month period indicate that the
debt was not canceled.
Significant bona fide collection activity does not include
nominal or ministerial collection action, such as an
automated mailing. Facts and circumstances indicating
that a debt was not canceled include the existence of a
lien relating to the debt (up to the value of the security) or
the sale or packaging for sale of the debt by the creditor.
9. Other actual discharge before identifiable event.
Enter “I” in Box 6 if there is an other actual discharge
before one of the identifiable events listed above.

Debt owned by a partnership is treated as owned by
the partners and must follow the rules for multiple
creditors.
Pass-throughs and REMICs. Until further guidance is
issued, no penalty will apply for failure to file Form
1099-C, or provide statements to debtors, for a canceled
debt held in a pass-through securitized debt arrangement
or held by a REMIC. However, see item 3 under Safe
harbor rules, earlier.
A pass-through securitized debt arrangement is any
arrangement in which one or more debts are pooled and
held for 20 or more persons whose interests in the debt
are undivided co-ownership interests that are freely
transferable. Co-ownership interests that are actively
traded personal property (as defined in Regulations
section 1.1092(d)-1) are presumed to meet these
requirements.

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, later.

When To File

Generally, file Form 1099-C for the year in which an
identifiable event occurs. See Exceptions, later. If you
cancel a debt before an identifiable event occurs, you may
choose to file Form 1099-C for the year of cancellation.
No further reporting is required even if a later identifiable
event occurs with respect to an amount previously
reported. Also, you are not required to file an additional or
corrected Form 1099-C if you receive payment on a prior
year debt.

When Is a Debt Canceled

A debt is deemed canceled on the date an identifiable
event occurs or, if earlier, the date of the actual discharge
if you choose to file Form 1099-C for the year of
cancellation. An identifiable event is one of the following.
1. A discharge in bankruptcy under Title 11 of the U.S.
Code. For information on certain discharges in bankruptcy
not required to be reported, see Exceptions, later. Enter
“A” in Box 6 to report this identifiable event.
2. A cancellation or extinguishment making the debt
unenforceable in a receivership, foreclosure, or similar
federal nonbankruptcy or state court proceeding. Enter
“B” in Box 6 to report this identifiable event.
3. A cancellation or extinguishment when the statute
of limitations for collecting the debt expires, or when the
statutory period for filing a claim or beginning a deficiency
judgment proceeding expires. Expiration of the statute of
limitations is an identifiable event only when a debtor's
affirmative statute of limitations defense is upheld in a final
judgment or decision of a court and the appeal period has
expired. Enter “C” in Box 6 to report this identifiable event.
4. A cancellation or extinguishment when the creditor
elects foreclosure remedies that by law extinguish or bar
the creditor's right to collect the debt. This event applies to

Exceptions

You are not required to report on Form 1099-C the
following.
1. Certain bankruptcies. You are not required to report
a debt discharged in bankruptcy unless you know from
information included in your books and records that the
debt was incurred for business or investment purposes. If
you are required to report a business or investment debt
discharged in bankruptcy, report it for the later of:
a. The year in which the amount of discharged debt
first can be determined, or
b. The year in which the debt is discharged in
bankruptcy.

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Instructions for Forms 1099-A and 1099-C (2014)

non-financial services, and who extend credit to
customers in connection with the purchase of those
non-financial goods and non-financial services, are not
considered to have a significant trade or business of
lending money, with respect to the credit extended in
connection with the purchase of those goods or services,
for reporting discharge of indebtedness on Form 1099-C.
See Regulations section 1.6050P-2(c). But the reporting
applies if a separate financing subsidiary of the retailer
extends the credit to the retailer's customers.

A debt is incurred for business if it is incurred in
connection with the conduct of any trade or business
other than the trade or business of performing services as
an employee. A debt is incurred for investment if it is
incurred to purchase property held for investment (as
defined in section 163(d)(5)).
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, you must show the interest
separately in box 3.
3. Nonprincipal amounts. Nonprincipal amounts
include penalties, fines, fees, and administrative costs.
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). For a nonlending
transaction, nonprincipal amounts are included in the
debt. However, until further guidance is issued, no
penalties will be imposed for failure to report these
amounts in nonlending transactions.
4. Foreign debtors. Until further guidance is issued, no
penalty will apply if a financial institution does not file Form
1099-C for a debt canceled by its foreign branch or
foreign office for a foreign debtor, provided all the
following apply.
a. The financial institution is engaged in the active
conduct of a banking or similar business outside the
United States.
b. The branch or office is a permanent place of
business that is regularly maintained, occupied, and used
to carry on a banking or similar financial business.
c. The business is conducted by at least one
employee of the branch or office who is regularly in
attendance at the place of business during normal
working hours.
d. The indebtedness is extended outside the United
States by the branch or office in connection with that trade
or business.
e. The financial institution does not know or have
reason to know that the debtor is a U.S. person.
5. Related parties. Generally, a creditor is not required
to file Form 1099-C for the deemed cancellation of a debt
that occurs when the creditor acquires the debt of a
related debtor, becomes related to the debtor, or transfers
the debt to another creditor related to the debtor.
However, if the transfer to a related party by the creditor
was for the purpose of avoiding the Form 1099-C
requirements, Form 1099-C is required. See section
108(e)(4).
6. Release of a debtor. You are not required to file
Form 1099-C if you release one of the debtors on a debt
as long as the remaining debtors are liable for the full
unpaid amount.
7. Guarantor or surety. You are not required to file
Form 1099-C for a guarantor or surety. A guarantor is not
a debtor for purposes of filing Form 1099-C even if
demand for payment is made to the guarantor.
8. Seller financing. Organizations whose principal
trade or business is the sale of non-financial goods or
Instructions for Forms 1099-A and 1099-C (2014)

Multiple Debtors

For debts of $10,000 or more incurred after 1994 that
involve debtors who are jointly and severally liable for the
debt, you must report the entire amount of the canceled
debt on each debtor's Form 1099-C. Multiple debtors are
jointly and severally liable for a debt if there is no clear and
convincing evidence to the contrary. If it can be shown
that joint and several liability does not exist, a Form
1099-C is required for each debtor for whom you canceled
a debt of $600 or more.
For debts incurred before 1995 and for debts of less
than $10,000 incurred after 1994, you must file Form
1099-C only for the primary (or first-named) debtor.
If you know or have reason to know that the multiple
debtors were husband and wife who were living at the
same address when the debt was incurred, and you have
no information that these circumstances have changed,
you may file only one Form 1099-C.

Recordkeeping

If you are required to file Form 1099-C, you must retain a
copy of that form or be able to reconstruct the data for at
least 4 years from the due date of the return.

Requesting TINs

You must make a reasonable effort to obtain the correct
name and taxpayer identification number (TIN) of the
person whose debt was canceled. You may obtain the
TIN when the debt is incurred. If you do not obtain the TIN
before the debt is canceled, you must request the debtor's
TIN. Your request must clearly notify the debtor that the
IRS requires the debtor to furnish its TIN and that failure to
furnish such TIN subjects the debtor to a $50 penalty
imposed by the IRS. You may use Form W-9, Request for
Taxpayer Identification Number and Certification, to
request the TIN. However, a debtor is not required to
certify his or her TIN under penalties of perjury.

Statements to Debtors

If you are required to file Form 1099-C, you must provide a
statement to the debtor. Furnish a copy of Form 1099-C or
an acceptable substitute statement to each debtor. In the
2014 General Instructions for Certain Information Returns,
see:
Part M for more information about the requirement to
furnish a statement to the debtor, and
Part J for specific procedures to complete Form 1099-C
for debtors in bankruptcy.

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Account Number

specific as possible. If you are filing a combined Form
1099-C and 1099-A, include a description of the property.

The account number is required if you have multiple
accounts for a debtor for whom you are filing more than
one Form 1099-C. Additionally, the IRS encourages you
to designate an account number for all Forms 1099-C that
you file. See part L in the 2014 General Instructions for
Certain Information Returns.

Box 5. Check Here if the Debtor was Personally
Liable for Repayment of the Debt

If the debtor was personally liable for repayment of the
debt at the time the debt was created or, if modified, at the
time of the last modification, enter an “X” in the checkbox.

Box 1. Date of Identifiable Event

Box 6. Identifiable Event Code

Enter the date of the identifiable event. See When Is a
Debt Canceled, earlier. However, if you actually cancel a
debt before an identifiable event and you choose to report
that cancellation, enter the date that you actually canceled
the debt.

Enter the appropriate code to report the nature of the
identifiable event. For more information about the code to
use when reporting each identifiable event, see When Is a
Debt Canceled, earlier, and Regulations section
1.6050P-1(b)(2). Also see Publication 4681, Canceled
Debts, Foreclosures, Repossessions, and
Abandonments.

Box 2. Amount of Debt Discharged

Enter the amount of the canceled debt. See Debt Defined
and Exceptions, earlier. The amount of the canceled debt
cannot be greater than the total debt less any amount the
lender receives in satisfaction of the debt by means of a
settlement agreement, foreclosure sale, a short sale that
partially satisfied the debt, etc.

Box 7. Fair Market Value (FMV) of Property

TIP

FMV should include the appraised value of the
property if the property is sold in a short sale.

If you are filing a combined Form 1099-C and 1099-A for a
foreclosure, execution, or similar sale, enter the FMV of
the property. Generally, the gross foreclosure bid price is
considered to be the FMV. If an abandonment or voluntary
conveyance to the lender in lieu of foreclosure occurred,
enter the appraised value of the property.

Box 3. Interest if Included in Box 2

Enter any interest you included in the canceled debt in
box 2. You are not required to report interest in box 2. But
if you do, you must also report it in box 3.

Box 4. Debt Description

Enter a description of the origin of the debt, such as
student loan, mortgage, or credit card expenditure. Be as

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Instructions for Forms 1099-A and 1099-C (2014)