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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4601 Apple St
North Charleston, SC 29405
Wando Woods
Residential
MLS# 23025707 / Active
Come home to your dream deep-water waterfront retreat on the Ashley River! This captivating elevated home is a rare gem, offering an unparalleled l...
172 Donning Drive
Summerville, SC 29483
The Ponds
Residential
MLS# 23025668 / Active
Welcome to 172 Donning Drive now for sale in the sought-after Ponds Community featuring a Fresh Exterior 2024 Paint Job and a 2022 Architichetural ...
Reduced -$5,000
2260 Woodland Shores Road
Charleston, SC 29412
General Lee
Residential
MLS# 23025661 / Active
Seller's are very motivated and have dropped price to their bottom line. Took off the market due to time of year! Less than 2 miles to the Riverlan...
Reduced -$15,000
1406 Marshwind Road
Awendaw, SC 29429
Woodville
Residential
MLS# 23025657 / Active
Welcome to your river retreat only 14 miles from Towne Center & only 22 miles from Downtown Charleston! Nestled amidst majestic oak trees with brea...
Reduced -$54,000
127 Pecan Drive
Summerville, SC 29483
Pecan Grove
Residential
MLS# 23025656 / Active
Priced under Apraisal! Coming back to the market No Fault to the seller. Welcome to a refined haven of contemporary luxury! This newly constructed ...
Reduced -$19,965
3193 Hugh Bennett Drive
Johns Island, SC 29455
Sea Island Preserve
Residential
MLS# 23025649 / Active
Quick Move-In Opportunity! Estimated Closing February/March 2024. This one won't last!Welcome to Sea Island Preserve. The only brand new luxury gat...
Reduced -$5,000
81, 81 1/2 Rutledge Avenue
Charleston, SC 29401
Harleston Village
Residential
MLS# 23025640 / Active
Welcome to the Sottile-Glover Mansion, this includes the main house, grounds keeper's building/garage/storage building and courtyard. A horizontal ...
3 Summit Avenue
Goose Creek, SC 29445
Sedgefield
Residential
MLS# 23025639 / Active
Beautiful four bedroom, two bathroom brick ranch located in an established neighborhood with no HOA. This home is in PRISTINE CONDITION and just wa...
Reduced -$4,000
108 Georgiana Drive
Cross, SC 29436
Lake Hill
Residential
MLS# 23025620 / Active
This spacious 1,908 square foot, handicap accessible home sits on a generous 0.96-acre lot, providing ample space for outdoor activities and garden...
Reduced -$5,000
19 Bradley Pasture Way
Ravenel, SC 29470
Poplar Grove
Residential
MLS# 23025592 / Active
Experience luxury living on 5 acres in Charleston's exclusive Poplar Grove community. This brand-new custom home offers a thoughtfully designed flo...
Reduced -$250,000
184 W Smith Street
Summerville, SC 29485
Lincolnville Square
Residential
MLS# 23025527 / Active
Welcome to this lovely property that offers a cozy ambiance with a fireplace, perfect for a warm and on chilly evenings. The interiors boast a natu...
Reduced -$2,000
552 Marsh Cove Circle
Summerville, SC 29486
Cane Bay Plantation
Residential
MLS# 23025514 / Active
This stately San Sebastian Loft is a can't miss. Impressive upgrades are adorned throughout. From the initial moment you walk through the door, you...
Reduced -$20,000
111 Shelly Street
Bonneau, SC 29431
Residential
MLS# 23025484 / Active
Welcome to this unique property that offers versatility and flexibility to its future owner. Located in a peaceful residential neighborhood, this p...
Reduced -$1,000
1510 Old Rosebud Trail
Awendaw, SC 29429
Pepper Plantation
Residential
MLS# 23025465 / Active
Serene marsh views on the Wando River! This 3 acre, private retreat is located within the gated community of Pepper Plantation. Just a short drive ...
Reduced -$200,000
330 Concord Street UNIT Th 9
Charleston, SC 29401
Dockside
Residential
MLS# 23025391 / Active
Enjoy lock-and-leave living in downtown Charleston from this 2 bedroom, 2.5 bath townhouse in Dockside Condominiums. Access this unit from the comm...
Reduced -$19,000
46-A State Street UNIT & 15 Lodge Alley
Charleston, SC 29401
French Quarter
Residential
MLS# 23025354 / Active
This beautiful townhouse consists of 2 tax map parcels owned fee simple and sold as one. There is no regime fee. This early 19th-century State Stre...
4113 Buccaneer Road
Isle of Palms, SC 29451
Big Goat Island
Residential
MLS# 23025283 / Active
Island paradise located off the coast of Charleston, SC on the Atlantic Intracoastal Waterway, channel marker 116, just north of the Isle of Palms,...
Reduced -$323,000
5330 Log Bridge Road
Hollywood, SC 29449
Fifteen Mile
Residential
MLS# 23025187 / Active
Back in market! Country living, No HOA!! Close to Charleston + beaches. Wonderful Lowcountry home on over 3 acres, Live oaks, magnolia and pine tre...
1490 Old Rosebud Trail
Mount Pleasant, SC 29429
Pepper Plantation
Residential
MLS# 23025127 / Active
This gorgeous riverfront home is next to new! This luxury estate includes a main house and a guest cottage that sits on 2.5 acres of land with amaz...
Reduced -$100,001
2238 Catesbys Blf
Seabrook Island, SC 29455
Seabrook Island
Residential
MLS# 23025096 / Active
RARE OCEAN FRONT OPPORTUNITY! Spectacular ocean view from almost every room! Classic family beach house with four bedrooms, four and a half bathroo...
Merritt Road UNIT B-15
Charleston, SC 29407
The Slips At Ripley
Residential
MLS# 23025039 / Active
Least expensive slip for sale at Ripley Light Marina!!! 17.5' X 60' Boat slip at Ripley Marina. Slip B-15. Located within walking distance of Calif...
Reduced -$10,000
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