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What are the tax implications of a short sale?

Additional Information:

I am considering a short sale on my home in Sherborn.  What are the resulting tax implications of a short sale?

ATTORNEY ANSWER:

Because a short sale involves the forgiveness of debt (in this case the unpaid balance of the mortgage) the seller may get a 1099-C for the amount of the mortgage deficiency.  There are options available which include bankruptcy or relief if you can be considered insolvent.  Also the Mortgage Forgiveness Debt Relief Act of 2007, may provide relief from debt forgiveness taxation for certain owner occupants until December 31, 2012.  These are fact intensive determinations and tax and/or legal counsel should be involved in the transaction. 

The Sherborn Tax attorneys at Beliveau Law Group provide legal services for all tax related matters throughout Massachusetts.  The law firm provides legal representation to individuals, businesses and families in the Boston Metrowest communities including: Lincoln, Sherborn, Lexington, Watertown, Belmont, Newton, Wellesley and Weston.

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