Can you state the short sale tax rule to me?

Asked by Desertraven, 85338 Mon Dec 1, 2008

In other words, what constitues the income to the IRS in a short sale? Like, sales price minus purchase price, even if negative, is considered income by IRS and taxable.....
But I don't know exactly how it's figured.
Thank you.

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Paul Welden, Agent, Scottsdale, AZ
Mon Dec 1, 2008
BEST ANSWER
Your questions need to be answered by an accountant...not a real estate agent. That being said...the amount that the lender stated on the 1099 form will be the amount that will be reported to the IRS as additional earned income. This amount may be any financial loss the bank incurred that is less than the balance owed on the mortgage loan.

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PAUL WELDEN
Buyer's Agent REALTOR
HomeSmart
Web Reference:  http://CheapPhoenixHomes.com
0 votes
The Hagley G…, Agent, Pleasanton, CA
Mon Dec 1, 2008
The site below may be able to help you....
0 votes
Stew Keene, Agent, Scottsdale, AZ
Mon Dec 1, 2008
Hi DR,

You should be asking a real estate attorney:

http://www.inspirerealtygroup.com/?page_id=50

Stew
0 votes
Dallas Texas, Agent, Dallas, TN
Mon Dec 1, 2008
Contact a CPA who specilizes in real estate transactions. It can also depend on the bank how the short sale contract is negotiated.
http://www.lynn911.com http://www.homes-for-sale-dallas.com
Web Reference:  http://www.lynn911.com
0 votes
Vicky Chrisn…, Agent, Purcellvile, VA
Mon Dec 1, 2008
Your question, if I understand it correctly, is what will be reported on a 1099 as income for you? It will be whatever the bank writes off. However, many people are able to take advantage of the Deb Forgiveness Act and not have to pay taxes on it... Here is the link to the Debt Forgiveness Act of 07: http://www.irs.gov/individuals/article/0,,id=179414,00.html
Web Reference:  http://www.vickychrisner.com
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