When someone purchases real estate, except in very limited circumstances, a 1099-S form has to be issued and filed with the IRS.
This is usually handled by a title company.
If the purchaser does not get title insurance, this is often missed.
If the 1099-S is not issued and filed in the year when the transfer takes place, it may be very difficult to find a title company that will handle the 1099-S requirements. This is true even if the title company will still issue title insurance.
In circumstances like this, where the 1099-S issues are not handled by the title company, often the lawyer for the purchaser (and occasionally other people, including the lawyer for the seller) have an affirmative duty to issue and file these 1099-S documents.
In circumstances of this kind, it may also be very difficult to find any other professional (such as a CPA or other tax professional) who will issue and file the required 1099-S documents.
Under these circumstances, if you buy a piece of property from a friend or relative, and then later want a lawyer to prepare a note and trust deed (i.e. what most people think of as a mortgage) or even just a deed from your friend or relative transferring the title to you once you have paid for the property, and if the bargain was struck, and money and possession changed hands in a prior calendar year, you may find that many good lawyers will be unable to help you, because of these 1099-S requirements.
This can put you in a very difficult circumstance.
It is important to make sure that all of the issues, including the preparation of both the title transfer documents (and any note and trust deed, mortgage, or contract) are handled at the time of the deal, and not left to be dealt with some time later.
Steven A. Heinrich
Divorce & Custody
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