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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2817& 2819 Eutaw Road
Holly Hill, SC 29059
Residential
Reduced -$71,000
6041 Wilkes Pond Drive
Hollywood, SC 29449
Stono Ferry
Residential
MLS# 23028447 / Active
Welcome to this beautiful property featuring a natural color palette throughout, creating a warm and inviting atmosphere. The heart of the home is ...
Reduced -$3,000
38 W Mariners Cay Drive
Folly Beach, SC 29439
Mariners Cay
Residential
MLS# 23028425 / Active
Mariners Cay is an exquisite waterfront condominium community that boasts breathtaking vistas of the Folly River, providing residents with a serene...
Reduced -$35,000
2953 Wolfe Creek Road
Walterboro, SC 29488
Residential
MLS# 23028423 / Active
Newer manufactured doublewide home set on private 6.4 acres of natural beauty. This home sits on a cleared acre and overlooks the wooded 5+ acreage...
1260 Crooked Oak Road
Charleston, SC 29492
Oak Bluff
Residential
MLS# 23028410 / Active
Live the Charleston lifestyle in the Bowen Plan in Oak Bluff. The Bowen's first Floor features a large kitchen island with Pearl Jasmin quartz coun...
Increase +$2,000
427 Rowley Lane
Summerville, SC 29486
Cane Bay Plantation
Residential
MLS# 23028376 / Active
Make your personal design selections on this stunning Richardson plan. This home can be up to 6 bedrooms if needed. Add a guest suite on the first ...
342 Cooper River Drive
Mount Pleasant, SC 29464
Tides Condominiums
Residential
MLS# 23028359 / Active
This exclusive residence has been completely renovated to satisfy the most discerning taste in luxury living near the Charleston Coast. With specta...
297 & 307 Wasson Lane
Walterboro, SC 29488
Residential
MLS# 23028344 / Active
TWO TURN-KEY HOMES AVAILABLE on 1.40 ACRES of LAND! Abundance of Updating have been completed to BOTH HOMES, giving them a Fresh New Inviting LOOK!...
1745 Atlantic Avenue
Sullivans Island, SC 29482
Sullivans Island
Residential
MLS# 23028311 / Active
Introducing 1745 Atlantic Avenue, designed by prominent local architect Carl McCants, and built by Rhodes Residential Builders, this quintessential...
40 Bee Street UNIT #111
Charleston, SC 29403
University Place
Residential
MLS# 23028278 / Active
Welcome home to 40 Bee Street #111: right downtown across from MUSC & close to the College of Charleston. This community is a short walk/ride to ma...
Reduced -$3,000
133 Wintergreen Road
Walterboro, SC 29488
Silverhill
Residential
MLS# 23028190 / Active
Discover the allure of this spacious 4002 sq. ft . brick home nestled in a serene subdivision. Boasting 4 bedrooms, a family room, formal dining ro...
359 Walters Road
Holly Hill, SC 29059
Evergreen
Residential
MLS# 23028123 / Active
Limited time up to $24k finance incentive with builder's preferred lender and attorney. Ready Now! Peacefulness is the key word. This charming sing...
Increase +$2,505
361 Walters Road
Holly Hill, SC 29059
Evergreen
Residential
MLS# 23028121 / Active
Limited time up to $22k finance incentive with builder's preferred lender and attorney. Move In Ready! In a cul-de-sac, and backs to green space. W...
Increase +$2,505
363 Walters Road
Holly Hill, SC 29059
Evergreen
Residential
MLS# 23028119 / Active
Limited time up to $23k finance incentive with builder's preferred lender and attorney. Move In Ready! In a cul-de-sac and backs to greenspace. The...
Increase +$2,505
317 Brooks Drive
Holly Hill, SC 29059
Evergreen
Residential
MLS# 23028112 / Active
Limited time up to $25k finance incentive with builder's preferred lender and attorney. Move In Ready! This homesite backs to green space. Welcome ...
Increase +$2,505
355 Walters Road
Holly Hill, SC 29059
Evergreen
Residential
MLS# 23028111 / Active
Limited time up to $24k finance incentive with builder's preferred lender and attorney. Ready Now! Welcome to your dream home in Holly Hill, SC! Th...
Increase +$2,505
125 Stono Circle
Santee, SC 29142
Center Pointe
Residential
MLS# 23028107 / Active
Limited time up to $22k finance incentive with builder's preferred lender and attorney. Ready Now! This homesite is back-to-back with an adjacent h...
Increase +$2,645
213 E Cooper Avenue
Folly Beach, SC 29439
Residential
MLS# 23028062 / Active
This serene beach house has been completely renovated and maintained by builder owner! The home includes an open concept kitchen and living/dining ...
Reduced -$50,000
209 Charleston Boulevard
Isle of Palms, SC 29451
Residential
MLS# 23028022 / Active
Discover the epitome of island living on the Isle of Palms, SC, with this remarkable residence just a heartbeat away from the beach. Nestled as the...
155 Rosefield Court
Summerville, SC 29485
Palmetto Reach
Residential
MLS# 23027985 / Active
This charming townhouse is nestled in the lovely neighborhood of Palmetto Reach and backs up to a community pond. Upon entry, you are greeted with ...
Reduced -$2,000
1004 Riverland Dr
James Island, SC 29412
Residential
MLS# 23027969 / Active
PROPOSED CONSTRUCTION! Welcome to James Island and the quaint Ferguson Village! Close to the incredible amenities of James Island County Park, and ...
Reduced -$20,000
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