First, let me state that I am a licensed Real Estate Broker and not a tax accountant or attorney and I am not qualified to give legal or tax advice.  However, as an agent dealing with Woodland and Sacramento property values that are much lower than what is currently owed on a property, I am often asked about the tax consequences of both foreclosures and short sales.  The IRS has given some guidance on the tax implications of a foreclosure or short sale and Congress passed the Mortgage Forgiveness Debt Relief Act of 2007.

I recommend anyone contemplating a short sale or forced with going through a foreclosure to consult a tax accountant to understand what the possible tax implications may be.  The IRS treats short sales and foreclosures the same for tax purposes.  Each person's circumstances are unique and it is critical to get good advice before proceeding with either a short sale or prior to the completion of the foreclosure.

Carolyn Gjerde-Tu specializes in Woodland CA real estate as well as Sacramento homes for sale.