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Can the IRS tax you on unpaid loans after a short sale?In: Property Law, Real Estate |
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Answer
It depends on how the lender reports it to you. If they report the difference on the loan as a cancelled debt (Form 1099-C), cancelled debt is taxable as income under the Internal Revenue Code.
More often, though, it's going to be reported on a 1099-A (Acquisition or Abandonment of Property). You must report this as you would any other sale of a home, but it may create a capital gain. I'd suggest getting your taxes professionally prepared on the year this occurs to make sure it's done right.
First answer by TaxManEA. Last edit by TaxManEA. Contributor trust: 75 [recommend contributor]. Question popularity: 6 [recommend question]
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