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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114 Poplar Circle
Summerville, SC 29483
Carl Knight II
Residential
MLS# 26019418 / Active
Discover this contemporary home on just over an acre of wooded land with no HOA in desirable West Summerville. Built in 1984, the property offers p...
1980 Minott Street
Charleston, SC 29412
Riverland Terrace
Residential
MLS# 26019416 / Active
Classic Riverland Terrace charm meets exceptional Lowcountry waterfront lifestyle at 1980 Minott. Canopied beneath magnificent live oaks on a gener...
1119 Island View Drive
Mount Pleasant, SC 29464
Harborgate Shores
Residential
MLS# 26019415 / Active
Welcome to 1119 Island View Dr, a beautifully maintained home located on a corner lot in one of South Mount Pleasant`s most desirable communities w...
2842 Maritime Forest Drive
Johns Island, SC 29455
Kiawah River Estates
Residential
MLS# 26019414 / Active
Welcome to 2842 Maritime Forest! This newer construction custom home offers a blend of luxury, comfort, and exclusivity in one of the most sought-a...
140 Blue Jasmine Lane
Summerville, SC 29483
Scotts Mill
Residential
MLS# 26019413 / Active
Welcome to 140 Blue Jasmine Lane! Located in the Scotts Mill neighborhood, this turnkey 3-bedroom, 2.5-bathroom home is completely move-in ready. T...
3000 Southern Pines Lane UNIT #242
Kiawah Island, SC 29455
Residential
MLS# 26019412 / Active
Exciting opportunity to own a 1/9th interest at Timbers Kiawah Ocean Club & Residences. This luxury appointed 3 bedroom/3.5 bathroom residence offe...
139 Lucca Drive
Summerville, SC 29486
Cane Bay Plantation
Residential
MLS# 26019411 / Active
Welcome home to 139 Lucca Dr. located in highly desirable Cane Bay Neighborhood. Conveniently located in Woodwinds subsection. Why wait for new con...
349 Decatur Drive
Summerville, SC 29486
Cane Bay Plantation
Residential
MLS# 26019409 / Active
Welcome to 349 Decatur Drive, a beautifully maintained 4-bedroom, 2.5-bath home nestled in the highly sought-after Old Rice Retreat at Cane Bay.Fro...
147 Golf View Lane
Summerville, SC 29485
Highlands Of Legend Oaks
Residential
MLS# 26019407 / Active
Welcome home to Lowcountry living at its absolute finest! Nestled within the highly desirable Highlands of Legend Oaks Plantation, this beautifully...
887 Melrose Drive
Charleston, SC 29414
Melrose
Residential
MLS# 26019405 / Active
Welcome Home! Where every detail has been thoughtfully curated, creating an elegant yet inviting space that`s truly move-in ready. At the heart of ...
1828 Gun Club Road
Charleston, SC 29414
Forest Lakes
Residential
Property being sold AS-IS. This home offers the opportunity to update as you see fit. The kitchen and bathrooms have been updated. Large sunroom on...
307 Umbria Drive
Summerville, SC 29486
Okatee
Residential
MLS# 26019400 / Active
Adorable brick home nestled on a cul-de-sac in an established Summerville neighborhood. Walk into the open living room, which flows right into the ...
1937 Gammon Street
Charleston, SC 29414
Carolina Bay
Residential
MLS# 26019398 / Active
Nestled in the highly sought-after Carolina Bay community in West Ashley, this beautifully maintained home offers the perfect combination of Lowcou...
866 Rue Drive
Charleston, SC 29414
Grand Oaks Townhomes
Residential
MLS# 26019397 / Active
Yes, it`s attached housing. But attached to what? Not to your neighbors. More to your life. Morning coffee on the screened porch. Deer grazing acro...
742 Leafwood Road
Charleston, SC 29412
Dellwood
Residential
MLS# 26019394 / Active
Tucked just off Fort Johnson Road on a spacious lot, this beautifully updated brick home blends timeless charm with thoughtful modern design. Insid...
1522 Mandarin Court
Summerville, SC 29483
Drakesborough
Residential
MLS# 26019391 / Active
Four-bedroom, 2.5-bath double front porch home on a cul-de-sac lot, zoned for DD2 schools. The main level includes an open-concept kitchen, two liv...
125 Pier View Street UNIT #105
Charleston, SC 29492
Pier View
Residential
MLS# 26019390 / Active
Welcome to 125 Pier View Street, a 2-bed, 2-bath condo in the heart of Daniel Island, just steps from restaurants, parks, trails, and the waterfron...
1018 Toadfish Run
Summerville, SC 29485
Summers Corner
Residential
MLS# 26019388 / Active
Welcome to Horizons, a gated, 55+ active adult community situated in the highly desirable Summers Corner development. Residents will appreciate low...
228 Equinox Circle
Ladson, SC 29456
Heatherwoods
Residential
MLS# 26019383 / Active
Welcome home to a beautifully designed property that perfectly pairs functional living spaces with premium upgrades. As you enter, the inviting foy...
134 E Morton Street
Summerville, SC 29486
Carnes Crossroads
Residential
MLS# 26019382 / Active
Better than new in Summerville`s coveted Carnes Crossroads! This one-year-old, 2,854 sq. ft. Lennar ``Fletcher`` plan includes 5 bedrooms, 3.5 bath...
8860 Shovelnose Court
North Charleston, SC 29406
Settlement at Salamander
Residential
MLS# 26019380 / Active
New Homes for Sale at Salamander Road | Charleston, SCWelcome to 8860 Shovelnose in North Charleston, South Carolina, located in The Settlement at ...
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