If I short sell my home for $50,000 less than what is owed, the bank will then submit a 1099. What does this mean exactly? Will I be paying for an extra $50,000 income or is this essentially a bill from Uncle Sam for $50,000?
2007-11-08 08:42:55 · 5 answers · asked by Anonymous in Business & Finance ➔ Taxes ➔ United States
The $50,000 gets entered on Line 21 as other income. Your actually tax bill on this money would vary depending on your other income.
There is one caveat to this. If you were bankrupt or insolvent at the time of the forgiveness of debt you don't have to pay taxes on the forgivness of debt up to the point of insolvency.
However, this doesn't mean that you get to ignore the 1099. It just gets entered on the return in a different area. Find a tax professional that has experience with forgiveness of debt and Form 982.
2007-11-08 09:11:58 · answer #1 · answered by Wayne Z 7 · 1⤊ 0⤋
Forgiven debt (what you owe and do not pay the bank) is taxable income.
You will be paying for an extra $50,000 income, but this tax will be less than $50,000.
2007-11-08 16:57:07 · answer #2 · answered by StephenWeinstein 7 · 1⤊ 0⤋
Have lawyer check your loan papers very carefully. If the loan is a non-recourse loan, then you will not have cancellation of debt income.
Many lenders, however, set their loans up as recourse. Particularly if you put little or not money down on the loan.
2007-11-09 02:30:57 · answer #3 · answered by Anonymous · 0⤊ 0⤋
You will not have to pay tax on the income from discharge of indebtedness to the extent you are insolvent.
2007-11-08 16:53:57 · answer #4 · answered by Anonymous · 2⤊ 0⤋
You will pay taxes on an additional $50k in income.
2007-11-08 16:52:21 · answer #5 · answered by Anonymous · 1⤊ 0⤋