If you are considering a real estate short sale of your home, you should be aware that you might receive a form 1099-C for the amount of the lender's losses.
This is considered loan forgiveness in the eyes of the IRS. If you have other assets such as savings and you are not insolvent, you may end up being responsible to pay ordinary taxes on the amount of the 1099-C.
If you settle a debt with a creditor for less than the full amount owed, you may be required to report this forgiven debt as regular income, with certain important exceptions.
The forgiven debts include money owed after foreclosure or property repossession or credit accounts that you don't pay.
There are exceptions noted below:
If a lender forgives or writes off $600 or more of a debt's principal (the amount not including interest or fees) must send you and the IRS a Form 1099-C at the end of the year. When you file your tax return for the tax year in which your debt was written off, the IRS will require that you report the amount on the form as income.
Fortunately, the Obama administration passed a law stating that if you are short selling your primary residence, you may be exempt from paying taxes even if a 1099 is submitted to the IRS by the lender.
While you may not have received this form from the creditor, the creditor may have submitted one to the IRS anyway. If you don’t list the income on your tax return and the IRS has the information of the transaction on file, you could get a tax bill or, worse, an audit notice. This could end up costing you more than just the original tax bill.
There are several exceptions stated in the Internal Revenue Code. For example, you do not have to report the income on your tax return if the write off of the debt is intended as a gift, you discharge the debt in bankruptcy, or you were insolvent before the creditor agreed to settle or write off the debt. You should consult a qualified tax and legal counsel to see if these circumstances apply.
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8537 Refuge Pointe Circle
North Charleston, SC 29420
The Refuge At Whitehall
Residential
MLS# 24012694 / Active
Located in The Refuge at Whitehall this Lowcountry gem features double porches and mature landscaping. The foyer leads you to a spacious, light-fil...
81 Branch Creek Trail
Summerville, SC 29483
Branch Creek
Residential
MLS# 24012693 / Active
Conveniently located minutes from historic Summerville with easy access to I26 and Azalea Square, you have everything you need from dining and shop...
106 Summer View Road
Summerville, SC 29486
Felder Creek
Residential
MLS# 24012692 / Active
This stunning 4 bedroom, 2.5 bath home is Move-Ready and waiting for its new owners! The HUGE master suite is separated downstairs offering the per...
4299 Persimmon Woods Drive
North Charleston, SC 29420
Coosaw Creek Country Club
Residential
MLS# 24012690 / Active
An absolutely breathtaking view is what you will find here on possibly the best golf course homesite in Coosaw Creek Country Club. This half acre h...
215 Bateaux Drive
Summerville, SC 29483
The Ponds
Residential
MLS# 24012689 / Active
**Sold Fully Furnished ** Golf cart tours available. Seeking the exclusivity of a 55+ community but with a more relaxed, less congested feel? Disco...
161 Whaler Avenue
Summerville, SC 29486
Cane Bay Plantation
Residential
MLS# 24012688 / Active
Welcome to West Lake! As you enter through the Lowcountry front porch of the Madison floorplan, you immediately are greeted by the tranquil views o...
121 Speer Street
Goose Creek, SC 29445
Cokers Crossing
Residential
MLS# 24012687 / Active
Come check out this charming 4-bedroom, 2-bathroom home, nestled in the quiet neighborhood of Cokers Crossing, conveniently located near shopping a...
205 Pine Hall Drive
Goose Creek, SC 29445
Liberty Hall Plantation
Residential
MLS# 24012686 / Active
Nestled in a serene and vibrant community, this beautiful two-story home offers everything you've been searching for and more. With 4 spacious bedr...
1862 Pineland Drive
Johns Island, SC 29455
Residential
MLS# 24012685 / Active
Looking for something out of the ordinary? This home is for you! Sitting on a large lot with no HOA and beautiful trees, this nearly new home provi...
1061 Blockade Runner Parkway
Summerville, SC 29485
River Birch
Residential
MLS# 24012682 / Active
You'll want to include this beautiful coastal style home in your search! Nestled on a large corner lot, it's directly across from a huge pond and w...
1250 Chrismill Lane
Mount Pleasant, SC 29466
Brickyard Plantation
Residential
MLS# 24012681 / Active
Stunning brick home on a corner lot in one of Mt Pleasant's most sought after neighborhood's, Brickyard Plantation. Beautiful white quartz countert...
612 Blueway Avenue
Summerville, SC 29486
Nexton
Residential
MLS# 24012679 / Active
This lovely Halston A floorplan by David Weekley has been lovingly maintained and barely lived in. the sellers really put a lot of thought into thi...
150 Bee Street UNIT #708
Charleston, SC 29401
Bee Street Lofts
Residential
MLS# 24012678 / Active
Welcome to Bee Street Lofts! This sophisticated 1 bed/1.5 bath luxury condo brings big city urban style to downtown Charleston. Located on Bee St n...
217 Moon Shadow Lane
Summerville, SC 29485
Arbor Oaks
Residential
MLS# 24012676 / Active
Welcome home to 217 Moon Shadow Lane!This charming two story home in the desirable Arbor Oaks neighborhood is sure to be anyone's dream home! This ...
9407 Sun Fountain Drive
Summerville, SC 29485
Wescott Plantation
Residential
MLS# 24012675 / Active
Private living spaces upstairs and down in this gorgeous warrantied, new townhome. Walk in to find your spacious foyer with 9 foot ceilings and gor...
9411 Sun Fountain Drive
Summerville, SC 29485
Wescott Plantation
Residential
MLS# 24012674 / Active
Beautiful, warrantied new three-level townhome in idyllic Westcott neighborhood. Walk in to find your spacious foyer with 9 foot ceilings and gorge...
113 Carriage Lane
Summerville, SC 29486
Tramway
Residential
MLS# 24012673 / Active
Check out this renovation opportunity right in the midst of the great Nexton expansion. Just a short distance to shopping, dining, entertainment, a...
1600 Oakhurst Drive
Mount Pleasant, SC 29466
Rivertowne Country Club
Residential
MLS# 24012672 / Active
Lowcountry living at its finest! This elevated 5 bedroom 4 bath home offers stunning views of the lake. On the first floor you will find a formal l...
1240 Creekwatch Trace
Seabrook Island, SC 29455
Seabrook Island
Residential
MLS# 24012671 / Active
Marsh front townhouse offers stunning sunset views that will take your breath away. Whether you're looking for a full-time residence or a weekend r...
66 Ponsbury Road
Mount Pleasant, SC 29464
Ion
Residential
MLS# 24012670 / Active
Welcome to the I'On community, it's a way of life, not just a place to call home. Explore the charm of this 2,000 + sq. ft, four-bedroom, 2.5 bath ...
417 Whispering Breeze Lane
Summerville, SC 29486
Cane Bay Plantation
Residential
MLS# 24012669 / Active
Welcome to this Luxurious 3 bedroom, 2 bath residence on a serene cul-de-sac with exquisite wood flooring, an expansive open-plan living area. The ...
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