Hi my name is Chris Bowers and I am the owner and team leader of The Bowers Team in Arizona. We are one of the leading short sale experts in the Arizona area.
I wanted to talk to you a little bit about one of the biggest concerns my clients have when they come to me to talk about short selling their home. This is regarding tax ramifications, tax consequences and whether or not they will owe taxes when they short sale their property. They will receive a 1099, but first I want to clear up a myth that’s out there: you won’t get a 1099 if you foreclose on your property. This is not true; you will get a 1099 if you foreclose on your property. You’ll get a 1099 whether you foreclose or short sale. The reason a bank actually accepts the short sale is because they feel they’ll get more money if they short sale your property versus a foreclosure.
I also want to go over the Mortgage Debt Relief Act of 2007. It was extended by President Obama until the end of 2012. Essentially the act states that if the home is your primary residence, under 2.5 acres of property and the forgiven amount is less than $2 million, it makes you exempt from paying taxes on the forgiven amount. I am not a tax attorney, a CPA or a lawyer; as a realtor I can give you information and guide you into the next steps. What you’ll want to do now is find a tax attorney or a CPA and bring them the information that I provided you, ask for more in depth information, and tell them about your specific situation. They’ll let you know whether or not you should short sale your property. If you do meet with a CPA I encourage you to ask them about Form 982 with the IRS. It’s an insolvency form stating you have more debt than you have assets and it could clear you from any tax consequences that you may have on the property.
If you don’t know of any CPAs please contact us and we can steer you in the right direction; you can also read some more about the Mortgage Debt Relief Act by contacting us. You can also contact us with any of your short sale questions and we’d be happy to help you.