Treatment of IRS 1099C on a 2nd home short sale
Just received an approval and closing date for a 2nd home short sale w/ a release of deficiency from BofA. Seller now realizes that with the IRS tax implications, they might be on the hook for a 40-50,000 tax laibility. Since home is not covered under the Mortgage Forgiveness Act, does anyone know of any way or strategy to offset this tax burden. Seller is ready to back out, and take a foreclosure.
Replies to This Discussion
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Permalink Reply by Jeff Payne on
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Barry,
The seller needs to talk to a CPA or tax atty immediately. A good CPA can work the numbers out so that the tax liability is lessened or gone...
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Permalink Reply by Wendy Rulnick on
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I second that - talk to a CPA. Check out IRS link about debt cancellation... The accountant can potentially use insolvency or another method to reduce taxes.
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Permalink Reply by Bryant Tutas on
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Barry. Why would they back out? If the property is foreclosed on they will STILL eventually receive a 1099c. The lender can do nothing about this. It's a fed tax law. They need to speak wit a tax accountant.
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Permalink Reply by Steve Early on
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Yes, yes, yes --- they need help from a CPA not a Realtor. As Wendy suggests, insolvency may be a strategy that will help. The CPA would have to demonstrate that they owed more than they owned (negative net worth) when the transaction went down and there is a specific form for that.
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