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Will I pay Taxes On My Short Sale Deficiency ?

By
Real Estate Agent with EXP Realty 414-525-0563 57026-90 Broker

    A question we often get from our Short Sale Sellers is: What are the tax consequences of doing a short sale?  We come from the school of "know what you don't know and refer to someone who does"....and don't hand out legal advice...suggest tax or accounting methods...however.....what we do suggest is that sellers who have done a short sale use a professional to do their tax returns if they have not done that in the past.
   form 982 Sometimes...not always....our sellers get a 1099 form from the lender or lenders who approved their short sale in the amount of the deficiency that they were not charged when the sale closed.  We give our short sale sellers as much information as we can when we list the home inclusive of handouts, web links, resources from other sources.  It is, at best, a confusing time of life with lots of activity, decisions to make, a move to prepare for....and sometimes what we said, what we gave them and links we mailed, get lost in the fray of the experience.  Months later...the 1099 arrives and we get emails and calls....how do I prepare taxes or what do I do with this 1099...I don't remember that you said we would pay taxes...
   First.....we have a list of accounting experts throughout the counties that we cover that we suggest our sellers use to prepare their return and offer any other advice that may be needed concerning their tax situation.  Next....we have learned that many accounting people...because short sales are not as common here as they are other places, are not aware of the federal government's 982 form.  This form basically is a verification that, at the time the short sale was closed, the seller was insolvent.  As a result, for the time that the government deems this form can be included with tax returns, it relieves the tax payer/short sale seller from paying tax on the amount of the deficiency.calculator

    Know what you don't know...we don't do taxes and hope accountants don't do short sales...we do recommend that the sellers/taxpayers take a copy of this form with them to their tax preparer....just in case....they don't know.
 
u  If you know anyone, anywhere, who is unable to pay their mortgage..please have them give us a call....we are happy to refer them to a professional from our nationwide network who can help them make an informed decision on how best to handle their situation.
     

Posted by

Sally K. & David L. Hanson, ABR, CDPE, CSS, e-Pro,ILHM, REDS


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Comments (9)

Kristin Johnston - REALTOR®
RE/MAX Platinum - Waukesha, WI
Giving Back With Each Home Sold!

Great advice as always guys!  I actually need some from you and will email you shortly.....thanks!

Jan 16, 2011 02:18 AM
Broker Patty Da Silva Da Silva
Green Realty Properties® - 954-667-7253 - Cooper City, FL
Top Listing Broker

Sally - Form 982 can be a friend to a short sale seller... so can a CPA... I too advise my sellers to speak with a CPA or a tax attorney.

Jan 18, 2011 01:52 AM
Sally K. & David L. Hanson
EXP Realty 414-525-0563 - Brookfield, WI
WI Real Estate Agents - Luxury - Divorce

thank you Richard....whenever I need a kick in the ego...i will call u !

Jan 18, 2011 08:40 AM
Kimberly A Norgard
Devlin McNiff Halstead Real Estate - East Hampton, NY

Sound advise.

Jan 18, 2011 09:17 AM
Sally K. & David L. Hanson
EXP Realty 414-525-0563 - Brookfield, WI
WI Real Estate Agents - Luxury - Divorce

thank u !

Jan 18, 2011 11:29 AM
Laura Giannotta
Keller Williams Realty - Atlantic Shore - Little Egg Harbor, NJ
Your Realtor Down the Shore!

You nailed it Hanson's!  Great information, and I love your saying we know what we know, and what we don't know!  

Jan 19, 2011 01:20 AM
Not a real person
San Diego, CA

Now you’ve done gone and reminded me that it’s a new year for taxes. Seems like I just finished last year’s. Oh, wait. I did. Maybe I won’t postpone them to October 15 this year. That might work. J

Jan 20, 2011 04:41 PM
Dorie Dillard Austin TX
Coldwell Banker Realty ~ 512.750.6899 - Austin, TX
NW Austin ~ Canyon Creek and Spicewood/Balcones

Good morning,

I like your statement "Know what you don't know and refer it to the professional! Good post!

Jan 21, 2011 10:59 PM