Does anyone know if you have to pay taxes on a short sale concession?

We got an approval letter that includes a $20000 seller concession. If the seller takes it what are the tax ramifications?  They are using the money to pay down the second mortgage. 

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Permalink Reply by sarah harley on September 9, 2011 at 12:08pm
Sorry I meant incentive not concession:)
Permalink Reply by Bryant Tutas on September 9, 2011 at 12:57pm
That's a good question. My guess would be that it is treated as income. They need to speak with a tax professional.
Permalink Reply by Jeff Payne on September 10, 2011 at 3:03am
Bryant, I agree, they need to talk to a tax professional about this.  Even with an investment property, it is not automatic that there are taxes owed from the short sale.  My non legal opinion is that the 1099 amount is based on the difference between the amount owed and the NET amount the bank recieves so in short, yes that 20,000 would be included
Permalink Reply by Smitty on September 10, 2011 at 11:15am
I believe it IS taxable, but I agree with Bryant and Jeff..an accountant needs to verify.
Permalink Reply by Joshua Gayman on September 11, 2011 at 7:40pm
I am guessing this is a Chase deal where the sellers are getting the credit from their lender? Tax consequences depend on if they are going to get a 1099 or not. If they are, then they are good on the deficiency, but I am not sure about taxes. I would ask a CPA about that. I am curious to find out tho, I hadn't thought of that on those Chase deals..

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