On Jan. 12, 2009, a new memo came out from Stuart Thronson, Assistant Director, Special Programs Division of the Department of Revenue with the Subject "Application of the Real Estate Excise Tax on 'Short Sales'."
In this memo he clarified that Real Estate Excise Tax (REET) would not be charged to the Seller based on the amount of debt relief the seller received from the Lender as part of the short sale process. He acknowledged that this relief was something negotiated between the Seller and the Lender and was not a consideration received in some way from the Buyer.
In addition he directed that if, previous to this new "interpretation of the applicable statutes," a seller had "paid REET on the amount of the forgiven debt in a short sale transaction" that he or she "may be entitled to a refund of the excess tax paid." A URL was then provided for applying for the refund.
Copy of original memo: a link will be added here for viewing the original memo in PDF format. It is currently uploading.
Original blog that this updates: "Taxing of Short Sale 'Phantom Income' - Confusing, Unfair and a Misinterpretation"
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