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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2658 High Hammock Rd
Seabrook Island, SC 29455
Seabrook Island
Residential
MLS# 23022810 / Active
Welcome home at 2658 High Hammock Rd in the highly sought-after private community of Seabrook Island. This single family home boasts 3 bedrooms and...
Reduced -$25,000
487 Old Dock Road
Kiawah Island, SC 29455
Middlewoods East
Residential
MLS# 23022743 / Active
Surrounded by majestic oaks on a spacious corner lot in West Beach Village, 487 Old Dock Road offers a peaceful sanctuary, nestled in one of the is...
4 53rd Avenue
Isle of Palms, SC 29451
Residential
MLS# 23022739 / Active
Live right by the beach, literally! 4 53rd Avenueis just one house back on a quiet street that dead ends to beach access. This is truly one of the ...
459 Race Street
Charleston, SC 29403
Westside
Residential
MLS# 23022679 / Active
Selling both tax map #4600702115 with tax map #4600702116. Zoned DR-2F. Main property in front, cottage in the back. Driveway currently fits 2 c...
200 River Landing Drive UNIT D307
Charleston, SC 29492
200 River Landing Dr
Residential
MLS# 23022670 / Active
Welcome to Daniel Island life. This is a 3rd floor, 2 bedroom and 2 full bath balcony condo with a view of the pond. This is an easy living unit wi...
106 W Arctic Avenue UNIT 3-C
Folly Beach, SC 29439
Pavillion Watch
Residential
MLS# 23022643 / Active
Stunning Oceanfront Condominium with Luxurious Features!This exquisite condo boasts breathtaking ocean views and is adorned with top-notch finishes...
Reduced -$30,000
111 Carolina Groves Boulevard
Moncks Corner, SC 29461
Carolina Groves
Residential
MLS# 23022609 / Active
Homes will be Ready This Winter! Welcome to Carolina Groves, located in tranquil Moncks Corner, SC. Developed by D.R Horton, this new construction ...
Increase +$6,575
312 Pelican Flight Drive
Dewees Island, SC 29451
Dewees Island
Residential
MLS# 23022568 / Active
Nestled within the serene beauty of Dewees Island, 312 Pelican Flight Drive beckons as the ultimate beach house getaway. This charming retreat boas...
198 Dove Lane
Walterboro, SC 29488
Residential
MLS# 23022520 / Active
An Abundance of Updating has been completed, Giving this 1960 sqft HOME, a Fresh New Inviting Look! Beyond the Front Entryway, Leads You Directly i...
2424 Thoreau Street
North Charleston, SC 29406
University Park
Residential
MLS# 23022504 / Active
Great home in a quiet, convenient location! 3 BR, 2.5 bath two-story with roomy kitchen and open living room. Main BR downstairs with walk-in close...
Reduced -$2,500
303 Twin Rivers Drive
Wando, SC 29492
Twin Rivers Towns
Residential
MLS# 23022475 / Active
BRAND-NEW TOWNHOME WITH GROUND FLOOR PRIMARY SUITE IS UNDER CONSTRUCTION NOW! A thoughtful interior layout boasts an open design offering easy livi...
5 Addison Street UNIT A&B
Charleston, SC 29403
North Central
Residential
MLS# 23022218 / Active
5 Addison A+B underwent a full renovation from the floor system up in 2021. The property consists of 2 individual houses; the front house is a 1184...
Reduced -$10,000
477 Sea Cloud Circle
Edisto Island, SC 29438
Wyndham Ocean Ridge
Residential
MLS# 23022181 / Active
Awesome opportunity to own a Professionally decorated, fully furnished townhome overlooking a lagoon in Ocean Ridge Resort. This townhome features ...
5810 Beverly Drive
Hanahan, SC 29410
Charleston Farms
Residential
MLS# 23022151 / Active
Brand New Home fully permitted for construction located in the heart of Hanahan! This is ONE of TWO homes to be built in the area both which will c...
Increase +$14,000
138 High Hammock Villas Road
Seabrook Island, SC 29455
Residential
MLS# 23022031 / Active
Renovated and ready-to-roll!! This 2 bed/2 bath villa is the perfect little bungalow for a getaway or a great investment property. Rental income an...
Reduced -$20,000
5434 Chaplins Landing Road
Hollywood, SC 29449
Residential
MLS# 23021997 / Active
A rare deepwater estate of 29+ acres on the Stono River lends breathtaking views to this upscale custom-built home of over 8,000 square feet. A Coo...
Reduced -$501,000
13101 Pelican Watch Villas
Seabrook Island, SC 29455
Pelican Watch Villa
Residential
MLS# 23021993 / Active
This one-bedroom Pelican Watch villa offers easy beach access with stunning water views and unmatched year-round sunsets. Upgraded, beautifully fur...
1879 Richmond Street
Charleston, SC 29407
Residential
MLS# 23021895 / Active
Incredible opportunity for almost one full acre in a prime West Ashley location with easy and almost immediate access to Highway I 526 and Paul Can...
Reduced -$40,000
2317 Cat Tail Pond Road
Seabrook Island, SC 29455
Seabrook Island
Residential
MLS# 23021877 / Active
Seabrook Island gem! This updated 3 bedroom 2 1/5 bath home is full of coastal charm and move-in ready. Perfect for a family beach getaway or an in...
Reduced -$15,000
366 Pelican Flight Drive
Dewees Island, SC 29451
Dewees Island
Residential
MLS# 23021822 / Active
Welcome to 366 Pelican Flight Drive, a captivating masterpiece that effortlessly blends bohemian-chic aesthetics with a profound dedication to gree...
312 Palm Boulevard
Isle of Palms, SC 29451
Residential
MLS# 23021775 / Active
Great potential renovation project or tear down and build new at a great location on Isle of Palms! Close to popular bars and restaurants on Sulliv...
Reduced -$100,000
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