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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136 Airy Drive
Summerville, SC 29486
Cane Bay Plantation
Residential
MLS# 26018955 / Active
Beautifully upgraded ranch home offering 4-bedrooms, 3 bathrooms & 3 car garage. Thus home features functional living spaces, & exceptional communi...
165 Dandridge Road
Walterboro, SC 29488
Hyde Park
Residential
MLS# 26018953 / Active
***Ask about the possibility of receiving 1% reduction in interest rate and free refi.*** Welcome to Walterboro and this inviting ranch style home ...
3546 Agape Court
Ladson, SC 29456
Paddock Pointe
Residential
MLS# 26018952 / Active
Welcome to 3546 Agape Court in the desirable Paddock Pointe community! This well-maintained, move-in ready, one-story home offers an inviting open ...
201 Heatley Street
Moncks Corner, SC 29461
Residential
MLS# 26018949 / Active
Looking for a move-in ready home with the perfect backyard? Welcome to 201 Heatley Street, Moncks Corner, SC! This newly upgraded, 1,310 sq. ft. pr...
196 Sea Oats St
Summerville, SC 29485
Summers Corner
Residential
MLS# 26018948 / Active
The Calhoun- This Elevated beautiful, spacious, open concept home with 2 laundry hook ups! One for stackable washer and dryer in owners suite and t...
Increase +$12,215
4550 Cape Island Drive
Awendaw, SC 29429
Paradise Island
Residential
MLS# 26018947 / Active
Welcome Home to Paradise Island. Tucked beneath towering pines and surrounded by natural beauty, this custom-built retreat offers a rare blend of p...
129 Orchard Blossom Lane
Summerville, SC 29485
Limehouse Farms
Residential
MLS# 26018945 / Active
The adorable Litchfield is a single story with an open layout. The front exterior is graced with a lovely front porch and the 2-car garage sits bac...
1001 Scotch Bonnet Way
Summerville, SC 29485
Summers Corner
Residential
MLS# 26018944 / Active
The Calhoun- Spacious, open concept home with 2 laundry hook ups! One for stackable washer and dryer in owners suite and the other more traditional...
Reduced -$5,050
105 Ingleside Drive
Summerville, SC 29486
Carnes Crossroads
Residential
MLS# 26018943 / Active
The Tradd is a beautiful Charleston Single with beautiful double porcches and a detached garage. The interior with 10` ceilings, features a foyer t...
Reduced -$11,450
143 Green Thistle Way
Summerville, SC 29483
Dawson Pointe
Residential
MLS# 26018940 / Active
Ready for move in. Welcome to Dawson Pointe, where modern townhome living meets the ease of condo ownership. This new two-story home features a mod...
126 Green Thistle Way
Summerville, SC 29483
Dawson Pointe
Residential
MLS# 26018938 / Active
Welcome to Dawson Pointe, where modern townhome living meets the ease of condo ownership. This new two-story home features a modern layout that max...
139 Green Thistle Way
Summerville, SC 29483
Dawson Pointe
Residential
MLS# 26018937 / Active
Ready for move in. Welcome to Dawson Pointe, where modern townhome living meets the ease of condo ownership. This new two-story home features a mod...
206 Belfast Lane
Walterboro, SC 29488
Ireland Ridge
Residential
MLS# 26018935 / Active
Welcome to this beautifully renovated home nestled in the quiet neighborhood of Ireland Ridge, just minutes from downtown Walterboro. Conveniently ...
1700 Eider Down Drive
Summerville, SC 29483
Drakesborough
Residential
MLS# 26018934 / Active
Nestled in the highly desirable Drakesborough community, this beautifully maintained two-story home offers the perfect blend of comfort, efficiency...
160 Ireland Drive
Summerville, SC 29486
Carnes Crossroads
Residential
MLS# 26018933 / Active
Welcome to Horizons, an exclusive 55+ gated active adult community situated in the highly desirable Carnes Crossroads masterplan. Residents enjoy l...
116 Archers Bay Street
Summerville, SC 29486
Carnes Crossroads
Residential
MLS# 26018932 / Active
Welcome to Horizons, an exclusive 55+ gated active adult community situated in the highly desirable Carnes Crossroads masterplan. Residents enjoy l...
120 Lilac Grv Way
Summerville, SC 29486
Sheep Island
Residential
MLS# 26018931 / Active
Near Nexton Living | Private Conservation Lot Home with Resort-Style Amenities + Amazing IncentivesOne of the final opportunities to build the soug...
158 Ireland Drive
Summerville, SC 29486
Carnes Crossroads
Residential
MLS# 26018930 / Active
Welcome to Horizons, an exclusive 55+ gated active adult community situated in the highly desirable Carnes Crossroads masterplan. Residents enjoy l...
109 Ingleside Drive
Summerville, SC 29486
Carnes Crossroads
Residential
MLS# 26018929 / Active
The Tradd is a beautiful Charleston Single with a detached garage. The interior with 10` ceilings, features a foyer that opens into a lovely dining...
Reduced -$11,250
115 Beamon Loop
Summerville, SC 29486
Carnes Crossroads
Residential
MLS# 26018928 / Active
The Jackson is a lovely two-story home with front porch where you`ll find a bright and airy foyer inside, a guest bedroom or study, full bath and l...
159 Ireland Drive
Summerville, SC 29486
Carnes Crossroads
Residential
MLS# 26018927 / Active
Welcome to Horizons, an exclusive 55+ gated active adult community situated in the highly desirable Carnes Crossroads masterplan. Residents enjoy l...
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