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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906 W Marymont Lane
Charleston, SC 29414
Grand Oaks Plantation
Residential
MLS# 26018273 / Active
Experience at 906 W Marymont Ln a layout designed for everyday comfort and practical living. The interior features a fireplace for warmth, while th...
521 Saint Andrews Boulevard
Charleston, SC 29407
Moreland
Residential
MLS# 26018272 / Active
Welcome to this stunning Charleston brick home in one of the area`s most sought-after neighborhoods, just minutes from historic Downtown Charleston...
1046 Planters Place UNIT #1046
Mount Pleasant, SC 29464
Planters Place
Residential
MLS# 26018270 / Active
Gorgeous updated condo just minutes from the Ravenel Bridge and wonderful area beaches! Situated privately on the end in a small enclave of townhom...
2244 Ashley Crossing Drive UNIT #521
Charleston, SC 29414
Arboretum
Residential
MLS# 26018269 / Active
EXCLUSIVE POND VIEW!! Welcome to 2244 Ashley Crossing Drive in the desirable Arboretum community of West Ashley. This 2-bedroom, 2-bath condominium...
747 Hill Street
Mount Pleasant, SC 29464
Old Mt Pleasant
Residential
MLS# 26018265 / Active
Thoughtfully designed by Hudson Cooper Designs & expertly built by Flynn Custom Homes, 747 Hill Street is a rare opportunity to own a newly constru...
228 Knightsbridge Drive
Charleston, SC 29418
Archdale
Residential
MLS# 26018263 / Active
A place to call home! As you enter the home from the foyer there is a large family room featuring a wood burning fireplace. The kitchen offers gran...
733 Ralston Court
Mount Pleasant, SC 29464
Bay Tree
Residential
MLS# 26018262 / Active
Coveted Convenience, Turnkey Finishes, & Walkable Mount Pleasant Living. Enjoy an exceptional opportunity at 733 Ralston Court in the desirable Bay...
253 Winter Drive
Cottageville, SC 29435
Residential
MLS# 26018260 / Active
Escape to 253 Winter Drive, a peaceful 2-acre country retreat about 30 minutes from both Summerville and Walterboro. Surrounded by mature trees and...
1006 Seatrout Street
Summerville, SC 29485
Summers Corner
Residential
MLS# 26018258 / Active
Discover HORIZONS, a place where you can wake up with countless opportunities but no commitments. Where new friends share stories, ideas and advent...
Reduced -$20,000
1102 N Lemacks Street
Walterboro, SC 29488
Civic Center
Residential
MLS# 26018257 / Active
Investment Opportunity!! This spacious home offers approximately 2,418 sq. ft. with 3 bedrooms and 2 baths. Features include a separate living room...
1134 Razor Clam Way
Summerville, SC 29485
Summers Corner
Residential
MLS# 26018253 / Active
Discover HORIZONS, a place where you can wake up with countless opportunities but no commitments. Where new friends share stories, ideas and advent...
Reduced -$38,700
557 Abigail Street
Moncks Corner, SC 29461
Strawberry Station
Residential
MLS# 26018252 / Active
Welcome home to Strawberry Station, one of the area`s most highly desired communities, where comfort, function, and everyday convenience come toget...
1684 Emmets Road
Johns Island, SC 29455
The Oaks At St Johns Crossing
Residential
MLS# 26018250 / Active
Welcome home to this turn key 4-bedroom, 3.5-bath residence in the highly desirable Oaks at St. Johns Crossing on Johns Island. Originally built by...
102 Maplewood Court
Goose Creek, SC 29445
Crowfield Plantation
Residential
MLS# 26018249 / Active
Nestled on a quiet cul-de-sac, this charming 4-bedroom, 3.5-bath traditional home offers space, flexibility, and a brand-new roof installed this ye...
Reduced -$15,001
104 Stratford Drive
Summerville, SC 29485
Kings Grant
Residential
Welcome to 104 Stratford Drive, this stately brick colonial makes a lasting first impression from the moment you pull into the driveway. With timel...
302 Summerset Lane
Summerville, SC 29483
Summerset Acres
Residential
MLS# 26018246 / Active
This home is on 2.59 acres of highland with the ability to build another home on the property ( accessory dwelling unit ) The property is just 15 m...
109 Preston Court
Goose Creek, SC 29445
Bedford Chase
Residential
MLS# 26018245 / Active
Welcome home! Looking for a move in ready home in the desirable Crowfield community? This is it! This immaculate home is situated on a cul de sac l...
1639 Locals Street
Summerville, SC 29485
Summers Corner
Residential
MLS# 26018244 / Active
Discover HORIZONS, a new active adult community, where you can wake up with countless opportunities but no commitments. Where new friends can share...
Reduced -$8,050
3516 Henrietta Hartford Road
Mount Pleasant, SC 29466
Park West
Residential
Long-range water views. No homes or docks directly across the creek. Renovated 2022 gourmet kitchen. Finished ground level with private mother-in-l...
804 Sprague Street
Charleston, SC 29412
Bayfront
Residential
MLS# 26018239 / Active
A rare opportunity to experience the very best of the Lowcountry from one thoughtfully crafted marshfront retreat. Built in 2024, this home combine...
215 Watersglen Drive
Summerville, SC 29486
Cane Bay Plantation
Residential
MLS# 26018233 / Active
Beautiful 4-bedroom, 2-bath home located in Cane Bay (Pine Hills). Built in 2024 and move-in ready, this home is situated on a quiet street within ...
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