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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13 Edisto Crossing Court
Ridgeville, SC 29472
Timothy Lakes
Residential
MLS# 22017464 / Active
PROPOSED CONSTRUCTION: NOW SELLING PHASE 3! Introducing the Mercer at Timothy Lakes. Find your very own slice of paradise in the community of Timot...
Increase +$10,000
44 Edisto Crossing Court
Ridgeville, SC 29472
Timothy Lakes
Residential
MLS# 22017280 / Active
PROPOSED CONSTRUCTION: NOW SELLING PHASE 3! Introducing the Adams at Timothy Lakes. Find your very own slice of paradise in the community of Timoth...
Increase +$10,000
9 Edisto Crossing Court
Ridgeville, SC 29472
Timothy Lakes
Residential
MLS# 22017273 / Active
PROPOSED CONSTRUCTION: NOW SELLING PHASE 3! Introducing the Townsend at Timothy Lakes. Find your very own slice of paradise in the community of Tim...
Increase +$10,000
5 Gadsdenboro Street UNIT #216
Charleston, SC 29401
Gadsdenboro
Residential
MLS# 22017006 / Active
Want to Live-in the most sought after living in Charleston, walk to all restaurants, churches, historical Charleston, across from Park. Private roo...
1972 Long Creek Road
Wadmalaw Island, SC 29487
Longcreek Plantation
Residential
MLS# 22016604 / Active
Closing costs negotiable. Private waterfront 6-acre estate on Wadmalaw Island. Idyllic setting with unsurpassed views on Bohicket Creek. Gourmet re...
Reduced -$100,000
268 Little Oak Island Drive
Folly Beach, SC 29439
Little Oak Island
Residential
MLS# 22016385 / Active
Looking for the ultimate in peaceful waterfront view living? There are over 1150 sq ft of wrap-around covered porches and 180 sq ft of open deck to...
Reduced -$100,000
184 Burbank Drive
Cross, SC 29436
Cross
Residential
MLS# 22015918 / Active
Superbly designed home on a canal which isonly a short boat ride to Lake Moultrie.Details make a difference in this classic fivebedroom and two ful...
Reduced -$223,900
100 Hannibal Trail
Ridgeville, SC 29472
Huckleberry Hill
Residential
MLS# 22014000 / Active
Nine properties for sale in this listing! One is a cottage on the Edisto River with two more river front lots, one on each side of the river cottag...
367 Pelican Flight Drive
Dewees Island, SC 29451
Dewees Island
Residential
MLS# 22013636 / Active
Exquisite oceanfront home on the private island of Dewees, boasting more than 1200 acres of undisturbed sandy beaches. Imagine an opportunity to se...
Increase +$510,000
113 E Arctic Avenue UNIT B
Folly Beach, SC 29439
Residential
MLS# 22013630 / Active
Have you been dreaming of owning the ultimate in lavish, luxurious, and elegant Folly Beach oceanfront living? Are you the discerning buyer looking...
Reduced -$399,000
141 William Clark Boulevard
Santee, SC 29142
Center Pointe
Residential
MLS# 22013155 / Active
Center Pointe is conveniently located in the heart of Santee, South Carolina, only minutes from I-95, with deep water Lake access from a public boa...
Increase +$3,440
7 Oyster Catcher Lane
Ravenel, SC 29470
Residential
MLS# 22011201 / Active
If you have dreamed of a Bespoke Charleston Homestead in the Historic Plantation district with Majestic Historic Live Oak Trees draped in moss, you...
136 W Mariners Cay Drive
Folly Beach, SC 29439
Marshview Villas
Residential
MLS# 22011165 / Active
This coveted third floor Corner condo is located in Marsh View Villas, the gated community of Mariners Cay. It offers spectacular views of Folly Ri...
10 54th Avenue
Isle of Palms, SC 29451
Isle Of Palms
Residential
MLS# 22008877 / Active
This front beach home located in ''The Avenues'' on Isle of Palms has awesome unobstructed views. Ocean breezes and good times await the next owner...
1478 N Highway 52
Moncks Corner, SC 29461
Residential
MLS# 22004012 / Active
If you want endless opportunities close to lake access, you have to check this out!! There is so much offered with this property, so hear me out. F...
Reduced -$125,000
913 Carolina Boulevard
Isle of Palms, SC 29451
Isle Of Palms
Residential
MLS# 21010730 / Active
This home was built by Thomas Evans Construction, one of the island's finest builders. The home is well-maintained with many upgrades in 2022 and 2...
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