Will you still get a 1099 when you so a short sale on an investment property?

Asked by Adela Picar, Brisbane, CA Fri May 2, 2008

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Hannah Flieg…, Agent, Larkspur, CA
Sat May 16, 2009
Hi Adela,

You will get a 1099C for a Short Sale and if you are able to get a Deed in Lieu a 1099A. If the property goes to foreclosure you will get a 1099A as well. However, speak with your savvy accountant because they will need to address this on the following tax year filing.
Ask them about 'rapid' depreciation strategies? Also, if you file your taxes as a real estate professional then you get certain tax benefits. For more information on short sales, credit repair and more please visit
1 vote
pamregister, Home Buyer, San Francisco, CA
Tue Mar 26, 2013
If you sell timber off your land for $5000K will you get a 1099 & have to pay taxes?
0 votes
Fernando Her…, Agent, Gaithersburg, MD
Thu Jul 29, 2010
Yes you will. . the sale will be reported with the IRS and a 1099 will be issued for the amount in question
0 votes
Get-smart, , Durham, NC
Sun Apr 26, 2009
More than likely an investor that does a short sale will get a 1099. However a good accountant can probably reduce your burden. You need a competent account that deals with homeowners in foreclosure.
0 votes
John Realtor, , California
Tue Feb 24, 2009
Note: This FAQ is meant as supplement to the full article "The Definitive Guide To Short Sales". Most questions will be answered in that article.

Will I have to pay capital gains taxes if I sell a property as a short sale?
No. If your bank suggested that, they are ridiculous. Capital gains would indicate that you are in some way "better off" financially because of money you have made. In a short sale, you lose and owe money. The only thing the bank could possibly mean is that the deficiency will be reported as 1099 income and you WILL have to pay taxes on that, but not as capital gains.
0 votes
Pam Winterba…, Agent, Danville, VA
Sat May 3, 2008

It is my understanding the bank will issue a 1099 on a foregiveness of dept per the IRS code. In any event you will always want to check with your CPA or tax advisor. Good luck.
0 votes
Jed Lane, Agent, Petaluma, CA
Sat May 3, 2008
You should. Here is a link to the IRS web site page that explains the Mortgage Forgiveness Debt Relief Act of 2007.
Any further questions should go to a CPA. Realtors are not qualified to give accounting or legal advice as we are not CPA's or attorneys.
Web Reference:  http://www.jedlane.com
0 votes
Ute Ferdig, Agent, Newcastle, CA
Fri May 2, 2008
Hi Adela. If there's actual debt foregiveness, the lender is supposed to issue a 1099. Whether you'll have to realize the forgiven debt as income is a different question, which should really be answered by a CPA. I heard that a tax payer who can show that he/she was insolvent (just before the debt foregiveness), may be able to escape having to realize the forgiven debt as income either altogether or a portion thereof. Consulting with a CPA is one of the most important things that a borrower facing foreclosure or a short sale should do before signing short sale papers. I hope this helps.
0 votes
Mike Kelly A…, Agent, Santa Rosa, CA
Fri May 2, 2008
All curent "emergency" laws regarding Short-Sales, Foreclosures are "owner occupied". The Tax Foregiveness Act is ONLY for owner occupancy, primary residence. I'd be surprised if they let you do a short sale with an investment property without asking for an unsecured promissory note. That might be the best way to go. If you're getting $100,000 forgiveness and they'll take $25,000 consider it!
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Charles Coac…, , San Jose, CA
Fri May 2, 2008
The answer for a for a person purchasing a home to reside in is, possibly. The federal government may forgive this debt if it is a purchase money debt. The answer for an investor is expect, the RED 1099. You will need to talk with a CPA, tax advisor or a real estate attorney. If someone is suggesting that you do a short sale, please contact your lender first and see if there is any way to modify your loan or what other programs that they may have in place to help you. If you find yourself in a position that the bank will not work with you then contact your CPA, tax advisor or RE attorney.
I wish you the best in getting your financial house in order.

Charles Coachman
0 votes
Liz Stevens, , Berkeley, CA
Fri May 2, 2008
You will most probably receive a 1099 from the bank taking the haircut.
0 votes
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