As many of you are aware, April 15th is just around the corner. 6 days! If you closed a short sale in the year 2014 then this may apply to you. (See below for Tax Implications in a Short Sale)
Please note that you may be able to exclude some or all of your cancelled mortgage debt as a result of a
short sale if you were insolvent immediately before the cancellation of debt. Please see pages 5 and 6 of
the IRS pub 4681 and the IRS insolvency worksheet which will assist you and your tax advisor in
determining if you qualify.
Please refer to the attached IRS pub 4681and consult your tax advisor for all tax information affecting debt
forgiveness and your short sale.
In addition, borrowers who receive a 1099-C in association with a short sale, foreclosure, or deed-in-
lieu should work with their accountant in order to confirm that the 1099-C was actually completed
correctly by the borrower’s lender.
Always retain your final HUD-1 (estimated settlement statement) as well as any documentation related to
the original amount of the mortgage. If the 1099-C has not been completed correctly, the borrower and a
CPA can demonstrate the correct calculations to the IRS.
Check with your tax professional about a possible extension of the Mortgage Forgiveness Debt Relief Act
for 2015.
IRSCircular230Disclosure: Any US federal tax advice contained in this communication is not
intended or written to be used, and cannot be used for the purposes of avoiding penalties under the
Internal Revenue Code, or promoting, marketing, or recommending to another party any
transaction or matter addressed herein. This section is not intended to give tax advice. It is
advisable to confirm the current tax laws with each case with your tax advisor.
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