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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130 River Landing Drive UNIT #3120
Charleston, SC 29492
Daniels Landing
Residential
MLS# 26018614 / Active
FULL LUXURY REDESIGN | END UNIT | ONE OF THE BEST LOCATIONS IN THE COMMUNITYCompletely transformed from builder-grade to custom luxury, this one-of...
4210 Wild Turkey Way
Johns Island, SC 29455
Briars Creek
Residential
MLS# 26018613 / Active
Welcome to 4210 Wild Turkey Way, an exquisite custom home built for comfort, luxury, and style within the gates of Briars Creek. A coveted private ...
2018 Redback Drive
Summerville, SC 29483
The Ponds
Residential
MLS# 26018609 / Active
This home in Cresswinds at the Ponds 55+ gated community is situated on a corner lot adjacent to the Clubhouse and all its amenities. Very well mai...
2415 Rice Pond Road
Charleston, SC 29414
Ashland Plantation
Residential
MLS# 26018606 / Active
Nestled on 1.54 private acres, this striking contemporary home offers a rare opportunity to own your own coastal peninsula with a shared, true deep...
1641 Indy Drive
North Charleston, SC 29405
Mixson
Residential
MLS# 26018605 / Active
Welcome to this beautifully designed Charleston single-style home, perfectly positioned on a desirable corner lot in the highly sought-after Mixson...
4897 Habersham Lane
Summerville, SC 29485
Wescott Plantation
Residential
MLS# 26018602 / Active
3 bedroom, 2 bath Master downstairs. Corner Lot Your new home has open space beside the home providing you with more land to use than is maintained...
Reduced -$1,100
3584 Berryhill Road
Johns Island, SC 29455
Cedar Springs
Residential
Welcome to 3584 Berryhill Road -- adorable 3-bedroom, 2.5-bath gem nestled in one of Johns Island`s most coveted locations! Park your boat in your ...
7401 Painted Bunting Way
Hanahan, SC 29410
Tanner Plantation
Residential
MLS# 26018594 / Active
Welcome to 7401 Painted Bunting Way, a beautiful four-bedroom, 2.5-bathroom home nestled on a cul-de-sac in the highly desirable Edgewood Trace nei...
Reduced -$6,000
501 Evenfall Lane
Summerville, SC 29486
Nexton
Residential
MLS# 26018593 / Active
This is the one! A thoughtfully designed Newington by Ashton Woods, expertly curated and just beginning construction, set on a premier corner homes...
1249 Dearsley Court
Mount Pleasant, SC 29464
Parish Place
Residential
MLS# 26018592 / Active
Welcome to this lovely South Mt. Pleasant charmer that just underwent a massive facelift over the past 30 days! The curb appeal POPS w/ the newly p...
196 Halstead Drive
Moncks Corner, SC 29461
Halstead
Residential
MLS# 26018589 / Active
ALL APPLIANCES INCLUDED! Ask about our Down Payment Assistance Program! Welcome home to this end-unit Cosmos! This beautifully designed 3 bedroom, ...
460 Colchester Court
Moncks Corner, SC 29461
Halstead
Residential
MLS# 26018588 / Active
Estimated completion August/September. Homesite backs up to our fishing dock! ALL APPLIANCES INCLUDED! Ask about our Down Payment Assistance Progra...
150 Bee Street UNIT #402
Charleston, SC 29401
Bee Street Lofts
Residential
MLS# 26018586 / Active
Experience elevated downtown living in this stylish 2-bedroom, 2.5-bath loft at Bee Street Lofts, featuring soaring 10+ ft. ceilings, an open-conce...
205 Huguenot Trail
Huger, SC 29450
French Quarter Creek
Residential
MLS# 26018584 / Active
Welcome home to this stunning, nearly new residence in the sought-after French Quarter Creek community -- built less than two years ago and move-in...
2229 Generals Street
Charleston, SC 29492
Point Hope
Residential
MLS# 26018581 / Active
This home has a total of 3,050 sqft with 2,621 sqft in the main house and 428 sqft in the guest suite over the garage. In addition, there is a part...
Reduced -$25,000
200 Sweet Cherry Lane
Summerville, SC 29486
Shell Pointe At Cobblestone Village
Residential
MLS# 26018578 / Active
Welcome to Shell Pointe at Cobblestone, where this beautifully maintained corner-lot home offers the perfect combination of comfort, convenience, a...
259 Gaines Circle
Cottageville, SC 29435
Christopher
Residential
MLS# 26018575 / Active
Welcome to 259 Gaines Circle -- a beautifully and completely renovated 4-bedroom, 2-bathroom home sitting on 1.8 acres in Cottageville, SC. Finishe...
70 Vanderhorst Street
Charleston, SC 29403
Radcliffeborough
Residential
MLS# 26018573 / Active
Turnkey Investment Opportunity - Steps from CofC & MUSC...Incredible opportunity to acquire an income-producing asset or a beautiful family home lo...
3019 Buccaneer Road
Isle of Palms, SC 29451
Jolly Rogers Estate
Residential
MLS# 26018571 / Active
Welcome to 3019 Buccaneer Road, where the tides set the pace and island living becomes a reality. Positioned on Goat Island, only accessible by boa...
210 Jasmine Drive
Walterboro, SC 29488
Woodland Terrace
Residential
MLS# 26018568 / Active
Welcome to 210 Jasmine Street in the established Woodland Terrace neighborhood of Walterboro. This spacious 4-bedroom, 3-bathroom home offers room ...
209 Sternside Run Avenue
Summerville, SC 29486
Cane Bay Plantation
Residential
MLS# 26018566 / Active
One of the finest water views in the community sets the stage for this meticulously maintained home located in the highly sought-after active adult...
Reduced -$11,000
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