If you are considering a real estate short sale of your home, you should be aware that you might receive a form 1099-C for the amount of the lender's losses.
This is considered loan forgiveness in the eyes of the IRS. If you have other assets such as savings and you are not insolvent, you may end up being responsible to pay ordinary taxes on the amount of the 1099-C.
If you settle a debt with a creditor for less than the full amount owed, you may be required to report this forgiven debt as regular income, with certain important exceptions.
The forgiven debts include money owed after foreclosure or property repossession or credit accounts that you don't pay.
There are exceptions noted below:
If a lender forgives or writes off $600 or more of a debt's principal (the amount not including interest or fees) must send you and the IRS a Form 1099-C at the end of the year. When you file your tax return for the tax year in which your debt was written off, the IRS will require that you report the amount on the form as income.
Fortunately, the Obama administration passed a law stating that if you are short selling your primary residence, you may be exempt from paying taxes even if a 1099 is submitted to the IRS by the lender.
While you may not have received this form from the creditor, the creditor may have submitted one to the IRS anyway. If you don’t list the income on your tax return and the IRS has the information of the transaction on file, you could get a tax bill or, worse, an audit notice. This could end up costing you more than just the original tax bill.
There are several exceptions stated in the Internal Revenue Code. For example, you do not have to report the income on your tax return if the write off of the debt is intended as a gift, you discharge the debt in bankruptcy, or you were insolvent before the creditor agreed to settle or write off the debt. You should consult a qualified tax and legal counsel to see if these circumstances apply.
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147 Tuscan Sun Street
Summerville, SC 29485
Summers Corner
Residential
MLS# 24010294 / Active
*Estimated for a Late May completion*The Georgetown is a 5 bedroom 3.5 bath home which includes a study. 5th bedroom is also an ideal bonus/family ...
16 Anita Drive
Charleston, SC 29407
Magnolia
Residential
MLS# 24010293 / Active
Welcome to one of the most sought after locations in Charleston! Step inside 16 Anita ..a charming, renovated cottage home with an open floor plan ...
104 Post Mill Drive
Summerville, SC 29485
Summers Corner
Residential
MLS# 24010292 / Active
Estimated for a May completion*This new two-story home features a study with french doors off the entryway, while down the hallway is an open-conce...
156 Tuscan Sun Street
Summerville, SC 29485
Summers Corner
Residential
MLS# 24010291 / Active
Estimated for a late May completion*The Fanning Plan- This 5 bedroom 3.5 bath home features a guest suite on the first floor with full bath that's ...
421 Savannah River Drive
Summerville, SC 29485
Lakes Of Summerville
Residential
MLS# 24010288 / Active
Priced to Sell. This is a Beautiful open floor plan. Upon entering the home, you will notice the large living room that flows into the eat- in Kitc...
1019 Ashley Avenue
Charleston, SC 29403
Wagener Terrace
Residential
MLS# 24010287 / Active
Welcome to your charming oasis in Charleston's vibrant Wagener Terrace neighborhood! Nestled among the lovely homes of the upper Peninsula, 1019 As...
175 Callibluff Drive
Summerville, SC 29486
Carnes Crossroads
Residential
MLS# 24010285 / Active
Welcome to 175 Callibluff Drive, a stunning semi-custom David Weekley home nestled on a rare wooded and pond lot within the prestigious Carnes Cros...
175 Pine Shadow Drive
Goose Creek, SC 29445
Pineland Heights
Residential
Welcome to your dream townhouse in a prime location! This newly renovated two-bedroom, two-bathroom gem is an absolute must-see. Step inside to dis...
7 Fieldfare Way
Charleston, SC 29414
Shadowmoss
Residential
MLS# 24010283 / Active
Welcome to this inviting and cozy home, perfect for those who appreciate a blend of comfort and practicality. The laminate floors promise easy upke...
1011 E Recess Road
Hanahan, SC 29410
Berkeley Hills
Residential
MLS# 24010281 / Active
This beautiful home in the Berkeley Hills subdivision of Old Hanahan provides a rare opportunity to live along a tidal creek that feeds into the pi...
100 Royal Star Road
Summerville, SC 29486
Cane Bay Plantation
Residential
MLS# 24010279 / Active
Elevate your lifestyle in The Richmond, a builder's favorite in Cane Bays Sanctuary Cove. This home, with $60,000 in upgrades, features a new 2023 ...
5000 Pratt Court
Summerville, SC 29485
Wescott Plantation
Residential
MLS# 24010278 / Active
Welcome to 5000 Pratt Court, a stunning residence nestled on a quiet cul-de-sac in the highly regarded neighborhood of Wescott Plantation. With a c...
503 E Arctic Avenue
Folly Beach, SC 29439
Folly Beach
Residential
MLS# 24010277 / Active
Welcome to this gorgeous ocean front home located just 5 blocks from Center St. Upon entering the home there is a grand foyer with beautiful walnut...
867 Colony Drive UNIT F90
Charleston, SC 29407
Rivers Bend
Residential
MLS# 24010276 / Active
Easy to Show - VACANT. Welcome to this Charming 1 bed / 1 bath home. This condo unit is a First Floor and is an End unit. Located minutes from down...
800 Powder Horn
Dorchester, SC 29437
Residential
MLS# 24010275 / Active
Home Sweet Home! Country living at it's finest, this beautiful home is sitting on 4.76 acres nicely tucked away from the hustle and bustle from the...
692 King Street
Charleston, SC 29403
Residential
1189 River Road
Johns Island, SC 29455
Residential
MLS# 24010273 / Active
Looking for TRUE DEEP WATER in the heart of Johns Island? Welcome to 1189 River Road, a hidden gem nestled on a spacious lot of close to 5 acres, t...
115 Post Mill Drive
Summerville, SC 29485
Summers Corner
Residential
MLS# 24010271 / Active
This home is estimated for a May 2024 completion. This two-story home features an elegant double-height entryway that flows to the open layout amon...
244 Tupelo Lake Drive
Summerville, SC 29486
Cane Bay Plantation
Residential
MLS# 24010270 / Active
Welcome home to 244 Tupelo Lake Drive, nestled in the serene Four Seasons community, where lakefront living meets comfort and elegance. This popula...
1907 Longhorn Lane
Summerville, SC 29485
Summers Corner
Residential
MLS# 24010268 / Active
*Estimated for a May completion* This spacious two-story home features an open layout among the dining room, kitchen and family room with access to...
418 Turnstone Street
Mount Pleasant, SC 29464
Tidal Walk
Residential
MLS# 24010267 / Active
Nestled on the most sought-after pond-front site within the serene neighborhood of Tidal Walk, this splendid single-family home in the heart of Mou...
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