a house was sold at sheriff sale. is the original homeowner liable for taxes or issuance of a 1099 as a?

Asked by Dm, New Jersey Thu Mar 5, 2009

a house was sold at sheriff sale. is the original homeowner liable for taxes or issuance of a 1099 as a result of a sheriff sale? if a 1099 is issued is this amount forgiven - if a refinance - what amount would be forgiven?

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Dm’s answer
Dm, Both Buyer And Seller, New Jersey
Mon Mar 9, 2009
Was interested in finding out if there are capital gains on the sale of a house via sheriff sale - and if so is it based on the amount owed on the mortgage or the amount that the property was sold for at sheriff sale? or the fair market value?
Does insolvency or debt forgiveness bill apply to refinanced mortgages?
0 votes
Keith Sorem, Agent, Glendale, CA
Fri Mar 6, 2009
I am not a CPA, however generally speaking the county recorder will not transfer property with property taxes or other liens. Generally the seller pays from the proceeds. In case of a sheriff sale, terms should be specified in the sale paperwork.
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blaison samu…, Agent, Santa Clara, CA
Fri Mar 6, 2009
William gave the good answer!! You need to consult with your CPA for the 1099 questions as we are not accountant. As William said, for the taxes, it would be the new owner or lenders responsibility to pay the back taxes.
0 votes
William Leigh…, , New Jersey
Fri Mar 6, 2009
Dan: If you were talking about income tax and the new laws, it would be wise to consult a tax expert. If you're talking about outstanding property taxes, I believe they go with the land and any new owner is then responsible for any back taxes due, not the former owner. If that is the case, (and, once again, that's a legal and/or tax expert's call) then the new owner will get the tax deduction on his income tax but, of course, only after paying them off. In NJ at least, the tax liens may have been sold and there is a hefty interest payment due to the party who bought them at auction.
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Keith Manson-…, , Milwaukee, WI
Fri Mar 6, 2009
According the 2007 debt forgiven bill the person does not have to be concered about a 1099C being filed ad being taxed on the diffeerence of what was owed and what the value was a the short sale. This is a temporary adjustmet to the goverment IRS taxing debt forgiveness but may be extended.

If refinacing no debt is foregiven unless you are talking about the allowance in the bill for banks to write down the debt to 90% and refinance with FHA. I have seen none of these transaction completed because the banks have to make a decesion to write down the debt! This bill was all voluntary!
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