Short Sale - Tax Issue

**donzi82** · 06-27-2009, 10:37 AM

I was told by an agent that short sales potentially have a tax liability issue for the seller of the home.

Can anyone explain this?

My understanding of a short sale is that the owner of the home makes an agreement to sell the home to a buyer without consulting the bank (i.e. no formal agreement). Then the owner then goes to the bank to negotiate the sale of the home to the new buyer for an amount that is less than the outstanding note. Correct?

**thesayregroup** · 06-27-2009, 12:51 PM

I am going to try to find the article about it but what I understand is there is a way around this that is pretty easy to do. You might just want to search on Google because that is where I found it but I can't remember what website it was.

**Greg** · 06-28-2009, 08:55 AM

At one time all forgiven debt was considered income and taxed as such. Recently the IRS changed the rules for home owners under certain conditions. The following link is to the IRS and explains if and when taxes are due and how to avoid paying the tax.

http://www.irs.gov/irs/article/0,,id=179073,00.html

**thesayregroup** · 06-28-2009, 09:54 AM

That's the link I was looking for, thanks Greg. There are many new laws/regulations out there to help those looking to do short sales and sell foreclosures. I know there are also many programs out there right now that make short sales seem to be a lot easier and a lot more profitable then they really are. Many banks now are not allowing many short sales due to new ways of holding onto them and getting more money out of them by various methods.