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8100 Ashton Ave #103
Manassas,  VA 20109
540-229-4021
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Lyle Holmes
Realtor
540-229-8937
Lyleholmes3@gmail.com
Stacey Holmes
Realtor
CDPE, CFS
Licensed in the
Commonwealth of Virgini
a
Stace Holmes Realtor Fredericksburg
Tax Ramifications with the short sale process
This is a “loaded” question. There may be tax ramifications to a Short Sale depending on your circumstances. You may have heard, “Don’t do a short sale because you will get a 1099 and have to pay taxes on the difference between what you owed on your home and what you sold it for or the amount the bank wrote off.”
This may be true, but this is not the whole story… If you borrow money from a lender and the lender later cancels or forgives the debt, you may have to include the cancelled amount in income for tax purposes, depending on the circumstances. When you borrowed the money you were not required to include the loan proceeds in income because you had an obligation to repay the lender. When that obligation is subsequently forgiven, the amount you received as loan proceeds is normally reportable as income because you no longer have an obligation to repay the lender. The lender is usually required to report the amount of the canceled debt to you and the IRS on a Form 1099-C, Cancellation of Debt. The thing that most people don’t know or don’t tell you is that with a Foreclosure, you will also get a 1099. In the case of a Foreclosure the 1099 is called a “1099-A.”
So what’s the difference between a 1099-C and a 1099-A?
The ‘C’ stands for “Cancellation of Debt” and the ‘A’ stands for “Acquisition or Abandonment of Secured Property”. The differences are much more than you get the ‘C’ with a Short Sale and the ‘A’ with a Foreclosure. It is important to know that while there are many differences, the tax consequences for the ‘C’ and the ‘A’ are the same. You may not even be required to pay taxes on the ‘income’ as shown on the 1099-C, but don’t just assume that you won’t have to pay. While we are very good at successfully closing Short Sales, we are not tax experts.

CONSULT A CPA OR TAX PREPARER Before making your final decision!

The Mortgage Debt Relief Act of 2007 provides relief to many homeowners. For more information on the Mortgage Debt Relief Act, how it works, who it applies to, and more, please go to the
IRS website directly.

Are there tax ramifications to a Short Sale?

Learning about tax ramifications with real estate short sales
The Piedmont Team offers Real Estate services in the following areas:
Culpeper, Fauquier, Fairfax, Fredericksburg, Manassas, Orange,
Prince William, Rappahannock, Spotsylvania and Stafford.
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Tax Ramifications - Short Sale