Not Every Short Sale Seller Pays Taxes on Canceled Debt

An average short sale seller may not really understand the tax consequences that may occur over the issue of canceled debt in a short sale.

All sellers who are contemplating a short sale should get legal advice, but equally as important is to receive tax advice from a qualified and competent tax adviser. It's possible that certain types of canceled debt may trigger tax liabilities on a short sale. The law is complex. In particular, the possible ramifications of hard-money loans such as equity loans or cash-out refis should be discussed beforehand with a tax accountant. If the seller did not use that money to improve the home, it's possible that the seller may owe taxes when all is said and done . . . read more about canceled debt.

More Articles by Elizabeth Weintraub:

• Establishing a Loss For Your Personal Residence
  
• Tax Consequences for a Home Business Office
  
• Writing Off Uninsured Home Losses

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