The 1099 Form and Short Sales or Foreclosures: When a property is foreclosed or a short sale closed, the net sale price is applied toward the debt, but it doesn’t satisfy the entire obligation. The rest is usually either forgiven or written off. The number reported on the Form 1099 is the amount of the loan that was not repaid, not the total amount of debt on the property.
Understanding the 1099 Form and Short Sales or Foreclosures
The foreclosure or short sale transaction is not a single transaction but two transactions, the sale or exchange of the real property, and secondly the forgiveness of the debt that exceeds the property’s fair market value.
Generally debts are written off or forgiven by a lender. To avoid recognizing taxable income, you must find a tax exception. Some exceptions are the Debt Forgiveness on Principal residence, insolvency exception, bankruptcy exception, etc.
At Boyer Law Firm we have handled such cases and were able to gain successful outcomes for our clients. If you are dealing with a short sale or foreclosure issue, Boyer Law Firm is fully equipped and trained to handle these types of transactions, including the closing. Please contact us with any further questions.