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Debt Relief – Insolvency – Bankruptcy Information » Insolvency » Do You Understand What Takes Place After You Do A Short Sale

Do You Understand What Takes Place After You Do A Short Sale

Article by Jim Perez

There seems to be a great deal of confusion as to what to try and do with the 1099A which you get after possibly losing your residence by means of a foreclosure or maybe a short sale. Not to mention the 1099C that you could get as well. So hopefully this can clear it up somewhat. Although when you need to do get your forms do save them and do bring them to your tax advisor to find out how they might help you together with filing out whatever forms properly. There are a good deal of homes for sale and the former homeowners of these will likely be receiving a 1099A and hopefully a 1099C shortly there after.

Okay so here it goes when you receive your 1099A it really is simply your receipt from the loan company that they’ve taken your property back. Now a foreclosure is viewed as a sale of property and there could possibly be a taxable event, but with a few exceptions.

1)Considering that the house that was foreclosed and it was your principle residence instead of investment property or a rental. The Difference from what you owed to what the lender sold your place is not going to involve a taxable event due to the Mortgage Foregiveness Debt Relief Act of 2007. Although you will have to take into account that this Act expires at the end of the year in 2012.

2)Now this can be when you see your tax advisor due to the fact in case you are insolvent at the time the financial debt is cancelled then you won’t have to be concerned in regards to the tax. Being insolvent is in the event you have far more financial debt than assets essentially this really is where you’ll need to submit to the IRS form 982 with your tax return to show that you are insolvent.

3)The debt is cancelled on account of bankruptcy, this should be your last resort if you need to use it.

So the owners of the houses for sale will receive a 1099A typically once the house has been sold as a foreclosure or as a short sale. So when you get a 1099A this is primarily the receipt with the lender stating that they have accepted the property as partial satisfaction for the amount of the financial debt owed and that your place has been sold. However the 1099A is not going to be the documentary evidence of cancellation of financial debt which you need to record together with your tax return. Its just essentially just the receipt, it’s a neutral tax document at this point since we are dealing with a foreclosure.

The difficulty starts off with the 1099C this is going to inform you and the IRS the cancellation of financial debt. This 1099C could cause two grievances for some.

1)The first one is if you reside a state which is recourse this may enable the lender to come after you and sue you in the amount that is nevertheless owed to them.

2)This is the number you are going to have to work with as to whether you’ll have a taxable event or not depending what the dollar amount that is to be cancelled by your loan company, and whether you might have far more liabilities than assets.

Here is where the true troubles start.

If you have a recourse loan you more than likely may not receive a 1099C for some time. The explanation is that the loan company will would like to hold out for as long as they are able to to ensure they can collect. Within the state of California your bank has approximately four years to collect, so depending on your state can determine how long it may be before you see a 1099C, especially for anyone who is handling a recourse mortgage. So the problem here is always that the 1099C is where the cancellation of financial debt goes into effect. So your cancellation can be a situation for you four years after you lost the home. A lot can change in four years you might be in a better monetary situation at the time they forgive the debt and then they want the money. So best thing to do is phone your bank and ask and be diligent on seeking to get that 1099C so that you are not handling it four years from the time you lose your home. If you’re in this circumstance I wish you luck on your circumstance and hope that years ahead are better to you, please consult an informed tax preparer when the time arrives it can be a little difficult on your own.

 

Many of the topics that the author writes about are relating to real estate as well as mortgages

Source:Santa Maria real estate santa maria homes .

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