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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3837 Delinger Drive
Mount Pleasant, SC 29466
Carolina Park
Residential
MLS# 24010549 / Active
Welcome to our exclusive enclave, Delinger's Point in Riverside, Carolina Park, where we build architecturally distinct, custom homes. 3837 Delinge...
5503 Green Dolphin Way
Kiawah Island, SC 29455
Kiawah Island
Residential
MLS# 24010548 / Active
Enjoy this comfortable two bedroom, two bathroom located in Turtle Cove! This is a an original owner villa that has been well maintained and cared ...
769 Catawba Road
Charleston, SC 29414
Melrose
Residential
MLS# 24010547 / Active
Welcome to this beautifully renovated single-story home in West Ashley's established Melrose community! Sitting on a spacious lot, this move-in rea...
3841 Delinger Drive
Mount Pleasant, SC 29466
Carolina Park
Residential
MLS# 24010544 / Active
Be part of the Delinger's Point story in one of the last remaining custom sections in Riverside at Carolina Park. Over the last dozen-plus years, R...
1184 Colfax Court
Mount Pleasant, SC 29466
Brickyard Plantation
Residential
MLS# 24010543 / Active
This home is in highly desirable Brickyard Plantation conveniently located south of Hwy 41 in the middle of Mount Pleasant. Many upgrades and updat...
4129 Chisolm Road
Johns Island, SC 29455
Residential
MLS# 24010541 / Active
Set upon a sprawling 19 acres, this idyllic Johns Island home provides the perfect country respite only 15 minutes from downtown Charleston. The fi...
1207 Wild Goose Trail
Summerville, SC 29483
Drakesborough
Residential
MLS# 24010540 / Active
This beautiful home is nestled in the neighborhood of Drakesborough. Picture yourself sitting on a rocking chair on the front porch, drinking your ...
154 Middleton Drive
Goose Creek, SC 29445
The Oaks
Residential
MLS# 24010539 / Active
The Ivy is a two-story, single-family home featuring a formal dining room as you enter, which then opens to the great room and kitchen. The versati...
1028 Hunley Waters Circle
North Charleston, SC 29405
Hunley Waters
Residential
MLS# 24010538 / Active
Welcome to your elevated oasis overlooking the serene Noisette Creek- just 10 minutes from Downtown Charleston! Nestled in a gated community, this ...
9412 Sun Fountain Drive
Summerville, SC 29485
Wescott Plantation
Residential
MLS# 24010537 / Active
Luxury Club Living in an up to the minute three-level townhome with room to roam. Enter into a sizeable foyer complete with wide plank flooring and...
1490 Simmons Street
Mount Pleasant, SC 29464
Old Mt Pleasant
Residential
MLS# 24010536 / Active
4 bedroom 2.5 Bath home on large (.34 acre) corner lot in heart of Very Desirable Old Mount Pleasant. Renovated, open concept kitchen / living room...
48 Briarcliff Drive
Charleston, SC 29407
Forest Acres
Residential
MLS# 24010534 / Active
Wonderful RANCH home in convenient location * 1 floor living * West Ashley green-way only a half a block away* NEW ROOF 2023* Travertine and marble...
425 Riverland Drive
Charleston, SC 29412
Stono Terrace
Residential
MLS# 24010533 / Active
Welcome to 425 Riverland Drive, located in sought-after James Island. Just a short stroll from Riverland Terrace, the Charleston Municipal Golf Cou...
2127 Fort Pemberton Drive
Charleston, SC 29412
Riverland Terrace
Residential
MLS# 24010532 / Active
Incredibly charming, classic 1950s Lowcountry Cape style home in the desirable Riverland Terrace neighborhood. This beloved community is bordered b...
498 Albemarle Road UNIT #208
Charleston, SC 29407
Albemarle
Residential
MLS# 24010531 / Active
Welcome to The Albemarle! This highly desirable community offers luxury condo living just a few minutes from the heart of downtown Charleston. This...
1071 Bennington Drive
Charleston, SC 29492
Cain Crossing
Residential
MLS# 24010530 / Active
Wonderful Townhome with GARAGE! Great location off clements ferry and minutes to Mt Pleasant. *Dog Park* Pool* Play park* Open floor plan offers *H...
101 New Spring Court
Summerville, SC 29485
Brandymill
Residential
MLS# 24010529 / Active
This charming one story home is only minutes to Downtown Summerville and convenient to shopping & restaurants plus sough after Dorchester 2 school ...
2326 Old Highway 6
Cross, SC 29436
Cross Area (west)
Residential
MLS# 24010528 / Active
This cozy home is nestled on a large 1-acre lot in an HOA free area! Picture yourself sitting on the front porch in a rocking chair, enjoying the c...
475 Spanish Wells Road
Summerville, SC 29486
Cane Bay Plantation
Residential
MLS# 24010527 / Active
This beautiful home has a spacious open floor plan and ample storage. With four bedrooms and two and a half bathrooms, there's room for every lifes...
109 Saluda Drive
Santee, SC 29142
Santee Cooper Resort
Residential
MLS# 24010526 / Active
Your dream home awaits you in Santee Cooper Resort, a gated waterfront and golf course community! This home has been completely remodeled to have a...
3087 Adventure Way
Ladson, SC 29456
Hunters Bend
Residential
MLS# 24010524 / Active
Welcome home to this fantastic property in Hunters Bend, with curb appeal galore. The entry foyer leads to sunlit & fresh open concept living space...
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