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#1
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Is there income tax on short sales?
Been hearing lately about short sales. A distressed homeowner makes a deal to sell his house for a really low (but market) price which is less than the loan. He gets the mortgage company to accept a full payoff of the loan at a big discount. The example used was a $100,000 mortgage which was paid off in full for $15,000 from proceeds of the sale. According to the talking heads, everyone is happy.
Question - what about income tax implications? If you pay off a credit card account at a discount, they report it to the IRS and you must report that discount as income and pay taxes on it. So what's the deal with short sales. Is it different with short sales or are they just telling part of the story? Anyone know? |
#2
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The Mortgage Forgiveness Debt Relief Act of 2007 says that for foreclosures, short sales and mortgage restructurings for less than the current balance on the mortgage, there will be no tax on the forgiven debt, if...
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#3
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Thanks Medmech. That's one I missed.
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#4
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Quote:
See IRS pub 4681 page 7 for an example of this. http://www.irs.gov/pub/irs-pdf/p4681.pdf |
#5
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A debt forgiven is like income, no?
__________________
" We have nothing to fear but the main stream media itself . . . ."- Adapted from Franklin D Roosevelt for the 21st century OBK #55 1998 Lincoln Continental - Sold Max 1984 300TD 285,000 miles - Sold The Dee8gonator 1987 560SEC 196,000 miles - Sold Orgasmatron - 2006 CLS500 90,000 miles 2002 C320 Wagon 122,000 miles 2016 AMG GTS 12,000 miles |
#6
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You looking for the Cliff notes Tom?
Outside of bankruptcy or insolvency, generally, the answer is yes. Negotiated credit card settlements are an example of this. Taxable income to the debtor. |
#7
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Not Cliff Notes. I was just consulting my common sense.
__________________
" We have nothing to fear but the main stream media itself . . . ."- Adapted from Franklin D Roosevelt for the 21st century OBK #55 1998 Lincoln Continental - Sold Max 1984 300TD 285,000 miles - Sold The Dee8gonator 1987 560SEC 196,000 miles - Sold Orgasmatron - 2006 CLS500 90,000 miles 2002 C320 Wagon 122,000 miles 2016 AMG GTS 12,000 miles |
#8
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Although they are in sync on this point, I wish the guys and gals who write the tax laws in Congress had your common sense. I'd have fewer gray hairs.
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