Sellers May Owe Taxes on a Foreclosure or a Short Sale

If you ask most sellers, you'll find none or very few have heard about foreclosure and short sale taxes

Many people don't realize that when the lender takes a home back in foreclosure or negotiates with a buyer to close a short sale, an actual sale has taken place.

That's because many real estate professionals don't realize that the I.R.S. will stick its fingers into the transaction and demand its fair share. So nobody talks about the tax consequences of a short sale or foreclosure with sellers. The first time a seller typically finds out that taxes are due is when they receive an envelope in the mail containing a 1099 from the lender.

It doesn't seem fair. The sellers lost money on the sale and lost their home. They don't need any more stress or bad news. However, tax planning is possible if sellers get advice before letting their home go . . . read more about Foreclosure and Short Sale Taxes.

More Articles by Elizabeth Weintraub:

• Buying Distressed-Sales Homes
  
• Before You Buy a Short Sale Home
  
• Basics of Selling on a Short Sale

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_{At the time of writing, Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.}