|
Q.What are the tax implications if I do a short sale?
A.A short sale represents a loss for the lender who will report the amount lost as debt forgiveness.
The lender will typically send the homeowner a 1099 not only for the amount of debt forgiven, but also for the lender's costs (legal fees, arrearages, etc..) unless the attorney representing the homeowner is capable of negotiating the amount down.
If the amount of debt foregiven cannot be negotiated down, the homeowner will have to pay income tax on the amount of debt forgiven. However, if the homeowner is insolvent (homeowner has a zero net worth), the homeowner may be able to complete a tax form to eliminate this tax.
|
