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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154 Lake Timicau Lane
Dewees Island, SC 29451
Dewees Island
Residential
MLS# 23008266 / Active
This beautiful home has been recently updated and boasts four spacious bedrooms and three modern bathrooms. The home features breathtaking views of...
Reduced -$75,000
1000 Middleton Drive
Goose Creek, SC 29445
The Oaks
Residential
MLS# 23008230 / Active
Enjoy all the conveniences of ranch-style living in the single-story Beech home. Enter this inviting and spacious front entry with guest and second...
Increase +$6,000
308 N Live Oak Drive
Moncks Corner, SC 29461
Residential
Three bedroom home in Growing Town of Moncks Corner. Convenient Location with Great Schools. Several upgrades in progress, with New Kitchen and Bat...
105 Risewell Court UNIT Lot 14
Johns Island, SC 29455
Hayes Park
Residential
MLS# 23006024 / Active
NO CHANGES - SPEC HOME UNDER CONSTRUCTION* NEVER BEFORE SEEN NEW CONSTRUCTION ON JOHNS ISLAND! Welcome to HAYES PARK - Johns Island's only pedestri...
Increase +$10
2262 Folly Road UNIT 2-B
Charleston, SC 29412
Palmettos At Folly
Residential
MLS# 23004954 / Active
Fabulous, fully furnished condo located less than one mile from Folly Beach in Palmettos at Folly. This top floor unit has views you have to see to...
Reduced -$5,000
808 Gadsden Loop
Walterboro, SC 29488
Blossom Village
Residential
MLS# 23003259 / Active
THIS BEAUTFUL HOME LOCATED IN WALTERBORO HAS 4 BEDROOMS, 1 AND HALF BATHROOM, SOME NEW FLOORING AND NEW VINYL WINDOW, NEED A LITTLE TLC. OWNER IS S...
111 Martins Point Drive
Wando, SC 29492
The Cove At Martins Creek
Residential
MLS# 23001673 / Active
Check out this beautiful to be built 3 bedroom + a loft, 3.5 bathroom spacious floor plan. This dual master plan is plenty of room for the whole fa...
107 Martins Point Drive
Wando, SC 29492
The Cove At Martins Creek
Residential
MLS# 23001672 / Active
Check out this beautiful new 4 bedroom 3.5 bathroom spacious floor plan. This dual master plan is plenty of room for the whole family. Walking in t...
0-B Chisolm Road
Johns Island, SC 29455
Residential
MLS# 23001013 / Active
Location, Location, Location! Build your dream home on this beautiful, wooded property just 14 miles from downtown Charleston! This 2600+ square fo...
Reduced -$10,000
3908-A Chisolm Road
Johns Island, SC 29455
Residential
MLS# 23001010 / Active
Location, Location, Location! Build your dream home on this beautiful, wooded property just 14 miles from downtown Charleston! This is a 2305 squar...
Increase +$54,000
118 Guilford Drive
Summerville, SC 29483
Guilford Gates
Residential
MLS# 23000628 / Active
Proposed custom built home by G Tupper III Construction. This price is not reflective of final price. Large wooded lot in an all custom built 30-35...
Increase +$73,000
114 Berkeley Circle
Summerville, SC 29483
Residential
MLS# 23000210 / Active
Great business opportunity to be in the heart of Summerville! 0.83ac Lot located just off of N Main Street near EarthFare,on the road leading to th...
262 Symphony Avenue
Summerville, SC 29486
Nexton
Residential
MLS# 22029968 / Active
The Broadway by Saussy Burbank at Nexton. Master bedroom down with 3 bedrooms up and open plan. This is an end unit with a 2 car garage and plenty ...
Reduced -$35,000
3882-4 Srevir Street
Johns Island, SC 29455
Residential
MLS# 22029808 / Active
Location, Location, Location! Build your dream home on this beautiful, wooded property just 14 miles from downtown Charleston! This 2600+ square fo...
Reduced -$304,496
100 Fresh Bloom Alley
Summerville, SC 29486
Nexton
Residential
MLS# 22029539 / Active
**Offering 5.99% or $25,000 FLEX cash through our Preferred Lender** on this stunning home is move in ready! It is in a beautiful, corner lot, two ...
Reduced -$100
102 Fresh Bloom Alley
Summerville, SC 29486
Nexton
Residential
MLS# 22029523 / Active
**Offering 5.99% or $20,000 FLEX cash through our Preferred Lender** This elegant home is complete and move in ready! It is our Hortus I single sto...
Reduced -$23,500
101 Fresh Bloom Alley
Summerville, SC 29486
Nexton
Residential
MLS# 22029367 / Active
**Offering 5.99% or $20,000 FLEX cash through our Preferred Lender** This gorgeous home is complete and move in ready! It features a courtyard livi...
Reduced -$20,300
3945 Bulow Landing Road
Ravenel, SC 29470
Poplar Grove
Residential
MLS# 22027619 / Active
Look no further you have found your one-story New Luxury Dream Home by AR Homes on an .8 acre lot with 3 car garage. This architecturally designed ...
2000 Wappoo Trace Lane
Summerville, SC 29486
Cane Bay Plantation
Residential
MLS# 22024887 / Active
Welcome to the Hazel floorplan. This open floorplan flows right into the kitchen where you can CHOOSE your own layout and upgrades. The covered pat...
Reduced -$40,000
26 Cumberland Street UNIT #303
Charleston, SC 29401
French Quarter
Residential
MLS# 22024846 / Active
City House Charleston (CHC) delivers a handsome and fresh residential experience a stone's throw from award-winning restaurants, shopping , homes, ...
26 Cumberland Street UNIT #208
Charleston, SC 29401
French Quarter
Residential
MLS# 22024798 / Active
Rare opportunity to own a newly built luxury residence in the heart of historic Charleston. High ceilings, private terraces, and well-appointed flo...
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