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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700 Donnelly Corner Drive
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MLS# 24012582 / Active
Nestled in the serene town of Awendaw, this charming elevated cottage on over 3-acre deepwater lot, with covered dock on the intercoastal is a wond...
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MLS# 24012579 / Active
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24 Barre Street
Charleston, SC 29401
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Residential
MLS# 24012578 / Active
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107 Dorchester Court
North Charleston, SC 29418
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MLS# 24012577 / Active
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MLS# 24012574 / Active
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MLS# 24012571 / Active
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1905 Aichele Drive
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MLS# 24012569 / Active
SELLER OFFERING 4.25% ASSUMABLE LOAN TO QUALIFIED BUYER WITH ACCEPTABLE OFFER! Come see this 4-bedroom, 3.5-bathroom home in the desirable Sanctuar...
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The ''Dillion'' floor plan offers you 4 bedrooms with 3 full bathrooms and a half bath downstairs. As you enter your home, you're greeted by the in...
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Discover the perfect blend of classic charm and modern convenience in this beautiful brick home. As you step inside, you'll be greeted by stunning ...
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Welcome to this stunning two-story home on an oversized wooded lot, nestled in a cul-de-sac within the Whitehall Subdivision.The 3D and video tours...
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MLS# 24012559 / Active
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MLS# 24012553 / Active
Absolutely stunning elevated home exudes luxury and elegance in every detail. You will be greeted with breathtaking views of the marsh, visible fro...
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