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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531 Eastern Isle Avenue
Summerville, SC 29486
Cane Bay Plantation
Residential
MLS# 26018190 / Active
Welcome to 531 Eastern Isle Avenue, nestled in the highly sought-after Del Webb at Cane Bay, one of the Lowcountry`s premier active adult communiti...
4296 Persimmon Woods Drive
North Charleston, SC 29420
Coosaw Creek Country Club
Residential
MLS# 26018188 / Active
Nestled within the prestigious gated golf course community of Coosaw Creek Country Club, this beautifully maintained home offers exceptional space,...
1555 Moss Spring Road
Mount Pleasant, SC 29466
Park West
Residential
MLS# 26018187 / Active
Welcome to 1555 Moss Spring Road, a beautifully updated, low-maintenance end-unit townhome in Park West! Offering 3 bedrooms and a thoughtfully des...
229 Amy Drive
Goose Creek, SC 29445
Berkley Hills
Residential
MLS# 26018186 / Active
Welcome to this charming 3-bedroom brick ranch, offering comfort & functionality. Inside you`ll find a beautifully renovated primary bath, updated ...
1403 Dove Run Drive UNIT A
Charleston, SC 29412
Creek Point
Residential
MLS# 26018185 / Active
1403 A Dove Run is a townhome, ideal location convenient to downtown Charleston. Lots of restaurants and entertainment. There is an HOA and they ma...
2782 Hidden Oak Drive
Seabrook Island, SC 29455
Seabrook Island
Residential
MLS# 26018184 / Active
It is rare to find three bedrooms with three full bathrooms in this price range! This gorgeous townhome has some of the most incredible outdoor liv...
5059 Thornton Drive
Summerville, SC 29485
Woodland
Residential
MLS# 26018179 / Active
Welcome to 5059 Thornton Drive in the highly desirable Wescott Plantation community! This move-in ready home offers 4 spacious bedrooms and 2.5 bat...
108 Evance Court
Summerville, SC 29485
Irongate
Residential
MLS# 26018177 / Active
Beautifully maintained all-brick home located on a quiet cul-de-sac in the desirable Irongate community. Offering approximately 1,802 sq ft, 4 bedr...
Reduced -$5,400
356 Price Street
Goose Creek, SC 29445
Forest Lawn
Residential
Welcome home to this charming 3-bedroom, 1-bath property situated on a spacious quarter-acre fenced lot. Featuring beautiful hardwood floors, a fun...
Reduced -$10,000
1324 Wild Goose Trail
Summerville, SC 29483
Drakesborough
Residential
MLS# 26018174 / Active
Welcome to 1324 Wild Goose Trail, where peaceful pond views, wooded privacy, and thoughtful upgrades create the perfect place to call home. Filled ...
112 Turner Field Way
Summerville, SC 29485
Fieldview
Residential
MLS# 26018173 / Active
Welcome to this beautifully updated craftsman-style home in the desirable Fieldview community, just minutes from historic downtown Summerville, bes...
Reduced -$10,000
1927 Palmetto Isle Drive
Mount Pleasant, SC 29466
Rivertowne Country Club
Residential
Some homes simply have a way of making you exhale the moment you walk in... From the soaring 15` ceilings to the open, sun-drenched floor plan, 192...
1604 Regimental Lane
Johns Island, SC 29455
Headquarters Plantation
Residential
MLS# 26018171 / Active
Exceptional marsh views--rarely found in this location--set this stunning home apart from the moment you arrive. Sitting on over half an acre, rela...
Reduced -$55,000
3318 Conservancy Lane
Charleston, SC 29414
Carolina Bay
Residential
MLS# 26018169 / Active
Welcome to 3318 Conservancy Lane, a move-in ready 3-bedroom, 2.5-bath townhome in Carolina Bay, one of West Ashley`s most loved communities. Though...
220 Tupelo Lake Drive
Summerville, SC 29486
Cane Bay Plantation
Residential
MLS# 26018168 / Active
The best value in Four Seasons has arrived! Combining one of the community`s most sought-after floorplans with one of its rarest homesites, 220 Tup...
309 Big Country Way
Moncks Corner, SC 29461
Residential
MLS# 26018167 / Active
Seller will finance home for buyer! Discover the space, comfort, and flexibility you`ve been searching for in this new 4-bedroom, 2-bath home situa...
1322 Willow Pond Road UNIT #8
Mount Pleasant, SC 29466
Willow Pond
Residential
MLS# 26018163 / Active
Welcome home to Willow Pond, a beautiful boutique community with only 13 homesites, surrounded by gorgeous live oaks, wetlands, a pond, and a walki...
3041 Ashburton Way
Mount Pleasant, SC 29466
Park West
Residential
MLS# 26018155 / Active
Welcome to life in one of Mount Pleasant`s most sought-after communities. Nestled within the highly-coveted subsection of Andover in Park West, thi...
702 Gentle Wind Drive
Summerville, SC 29486
Cane Bay Plantation
Residential
MLS# 26018152 / Active
Welcome to The Eden, a home designed for effortless living with thoughtful spaces that adapt to your lifestyle. The heart of the home features an o...
136 Alston Circle
Goose Creek, SC 29445
Crowfield Plantation
Residential
MLS# 26018149 / Active
Sharp looking & well-maintained one-story ranch in desirable Crowfield Plantation!! CONVENIENT TO EVERYTHING! This open floor plan features vaulted...
119 Hummingbird Avenue
Ladson, SC 29456
Plantation Ridge
Residential
MLS# 26018146 / Active
Calling All Investors! 119 Hummingbird Ave is ready for a makeover/renovation. It`s located in the Plantation Ridge Subdivision! Sitting on a spaci...
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