More on Taxes & Foreclosures & Short Sales

Mortgage and Lending with 37810/46375/1431088

The income tax consequences of foreclsoure and shorts ales have been the subject of much interest due to the mortgage crisis...This article will provide an overview of the major Federal income tax issues..However it is not intended to provide advice on specific situations..Rather it will help real estate and mortgage advisors become more valuable assets to their clients by better understanding when to refer borrowers for professional assistance.

The fundamental concept is the federal rule about Cancellation of Debt Income (CODI). Briefly, debt that is cancelled or forgiven generally results in ordinary income to the debtor, unless an exception, such as bankruptcy, insolvency, 2007 Relief Act etc. applies..

By becoming familiar with the rules for their states, brokers and other advisors are in a position to  refer borrowers for professional assistance and recognize improper reporting by lenders after foreclsoures or short sales.. If a borrower receives a Form 1099 from the lender showing erroneous recourse status or fair market value, the first step is to write the lender requesting a correction.  If the lender refuses or fails to respond, the borrower's tax preparer should report the disposition correctly and attach an explanation of why the lender 1099 is incorrect.. While brokers and others in the real estate field should not offer firm conclusions on thes tax issues, a abasic knowledge of this are will make them a valuable resource to refere clients to qualified tax advisors familiar with the state's laws.

Posted by


This entry hasn't been re-blogged:

Re-Blogged By Re-Blogged At
Real Estate Best Practices
Idaho Ada County Boise
Active Rain Newbies
Posts to Localism
Addicted to Active Rain
more on taxes and foreclosures and short sales

Spam prevention

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?


Suzi Boyle

Awarded"Nation's Top 200"--10 times
Please call to get Preapproved
Spam prevention

Additional Information