The Lender is charged with issuing the 1099 for recourse or non-recourse debt relief. I believe the IRS will step up enforcement and issue guidelines to lenders to “prompt” them to follow the IRS requirements and issue those 1099’s. This is a great revenue opportunity.

In the case of non-recourse debt, refer to IRS Pub. 544, 2006 version, pages 4 & 5 “Foreclosures and Repossession”.

If actually bankrupt per IRS Pub. 908 guidelines, insolvency as calculated by IRS standards will void the tax due on debt relief.

If sleepless still, add IRS Pub 525 for added rules and guidelines!