Under what circumstance would a lender file Form 1099-A with the IRS?

The correct circumstance for a lender to file Form 1099-A with the IRS is when the lender forecloses on the taxpayer's real property. This form is specifically designed to report the acquisition or abandonment of secured property, which occurs during foreclosure proceedings.

When a lender takes possession of the property due to default on a loan, they are required to report this transaction to the IRS. The 1099-A identifies the property involved, the amount of outstanding debt, and any proceeds from the sale if applicable. This information is important for tax purposes, as it can impact the borrower’s tax return, especially regarding any gain or loss realized from the foreclosure or potential cancellation of debt income.

Other choices involve scenarios that do not align with the specific reporting requirements of Form 1099-A. While defaults on loans and cancellation of debt may have tax implications and require different forms, they do not meet the criteria that trigger the filing of Form 1099-A.