Charge-offs, recoveries, and gross proceeds from any bad debt sale to a third party will be reported to investors in a year-end investor statement and on tax form 1099-B. In the case of a debt sale, the sales price can be compared to the cost (or other basis) to calculate the net amount of gain or loss. The summary table at the bottom of the Form 1099B provides short- and long-term data. Investors are encouraged to consult their tax advisor to determine their tax basis on loans sold to debt buyers.
Delinquent (late) loans which have not yet been sold to a debt buyer will have no impact upon taxes until further action on these loans takes place.