Short Sale Tax

by : Alex Greben

Short Sale Tax - IRS might get you The current Real Estate market is full of sellers who are going through a short sale situation. In a short sale the lender is accepting less money then the total amount due. Be aware the IRS considers debt forgives as income. This matter is best left to a CPA and/or their attorney. In general most people don't have the money to hire an attorney, so they seek a real estate professional for advice. Many agents don't specialize in this field and don't have the knowledge of potential tax liabilities that could arise. There are some exceptions to debt forgiveness tax.

IRS does have exceptions -In the even of a bankruptcy discharge, the forgiven dept can be included in the bankruptcy. -If the seller can prove his liabilities exceed his assets. The seller will have to come up with evidence of this to IRS when taxes are done.

In most cases these exceptions would work. Especially since most lenders require; to show financial hardship in order to convince them to do a short sale. Seller needs to notify the IRS why the dept forgiven shouldn't be counted as income, if the seller doesn't take action the IRS could consider dept forgiven as income.

For more information, contact a Certified Public Accountant. Buyers of Short Sales should consider doing more research on the topic and/or consult a local short sale specialist. The process takes a bit more time and paperwork, but could be a great opportunity.

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