“Is forgiven debt from a short sale taxable?”

By
Real Estate Agent with REALTY ASSOCIATES

For the most part the answer is "No" if the home is your primary residence.  There are some exclusions depending on income level, etc. The details are below and this is straight from:

 http://www.irs.gov/individuals/article/0,,id=179414,00.html

Comments (2)

Bob Murphy
Keller Williams Realty Consultants - New Albany, IN

Well Alfonso this is a very interesting publication.  Looks like canceled mortgage debt is non taxable except when it is.  The IRS really doesn't make it that clear.

Here is another interesting fact.  The lender doesn't have to forgive the debt in a short sale.  They can always come after the borrower after the closing.  And it looks like some lenders are.  I have   who did a short sale with Chase about 4 months ago.  He just called me today to see if I could help him because Chase was (forgive the pun) chasing him for the remainder on the note apparently along with a sizable amount of legal fees.

Aug 26, 2009 08:10 AM
Alfonso Parodi
REALTY ASSOCIATES - Houston, TX

I agree it is pretty confusing.  The IRS really doesn't make it that clear.  I was looking at the youtube  post by Suze Orman.  My question will be what happen after 3 years? 

(http://www.youtube.com/watch?v=OboT-c0QNtA&eurl=http%3A%2F%2Fgaylifesantafe%2Dhomesandrealestate%2Ecom%2Fsuze%2Dorman%2Dexplains%2Dthe%2Dbenefits%2Dof%2Da%2Dshort%2Dsale%2F&feature=player_embedded 

Aug 26, 2009 08:26 AM