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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1600 Long Grove Drive UNIT #827
Mount Pleasant, SC 29464
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Residential
MLS# 24010519 / Active
Just 2 miles from Isle of Palms. Beautiful condo with bright open floor plan. 9ft ceilings, walk in closets and a great porch, with an outdoor stor...
7529 Tedder Street
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MLS# 24010518 / Active
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227 Blue Haw Drive
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MLS# 24010517 / Active
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253 Blue Haw Drive
Moncks Corner, SC 29461
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Residential
MLS# 24010516 / Active
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MLS# 24010515 / Active
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245 Blue Haw Drive
Moncks Corner, SC 29461
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MLS# 24010514 / Active
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145 Sweet Alyssum Drive
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MLS# 24010513 / Active
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257 Blue Haw Drive
Moncks Corner, SC 29461
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MLS# 24010512 / Active
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233 Congaree River Drive
Summerville, SC 29485
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Residential
MLS# 24010510 / Active
Don't miss the townhome you've been waiting for! Nestled in a cul-de-sac on a wooded lot in the desirable Lakes of Summerville neighborhood, sits t...
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WHEN SIZE DOES MATTER: You now have a PERFECT FIT in 5495 Alpine Drive. The home & property are SO LARGE that I'm going to break down everything th...
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203 Bering Lane
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MLS# 24010502 / Active
Beautiful Holly Model with many upgrades and all furnishings included in sale of home.Beautifully designed hardi-plank sided home offers many upgra...
2304 Kennison Lane
Mount Pleasant, SC 29466
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Residential
MLS# 24010500 / Active
Welcome to 2304 Kennison Lane, situated in Chadbury Village in Mount Pleasant. This home offers a blend of modern updates, comfortable living, and ...
430 Philbrick Drive
Goose Creek, SC 29445
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MLS# 24010497 / Active
Welcome to 430 Philbrick Drive, a lovely large home on a quiet cul-de-sac! This home is situated on a great .22 acre lot with a fenced backyard and...
117 Quinby Street
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MLS# 24010494 / Active
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8483 Yadkin Cir UNIT D
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MLS# 24010491 / Active
**Priced below appraised value** This inviting first-floor condo is tucked away in a quiet and centrally-located neighborhood that's close to every...
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MLS# 24010490 / Active
Seller says bring her an Offer!! Priced thousands less than a new build and has all of the expensive upgrades with additional improvements and Read...
404 Farm Road
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MLS# 24010486 / Active
PICTURE PERFECT HOME IN PINEVIEW HILLS! This COMPLETELY RENOVATED and move-in ready brick ranch with spacious backyard offers 3 bedrooms and 2 full...
3320 Coon Hollow Drive
Johns Island, SC 29455
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MLS# 24010485 / Active
Discover the epitome of serene coastal living in this charming one-story residence nestled on Seabrook Island. Boasting a spacious open floorplan a...
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Walterboro, SC 29488
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This Country GEM offers both seclusion and accessibility without compromising on the comforts town provides. Town amenities and I-95 accessibility ...
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