Sellers of short sales often are not aware of the income tax effects of the short sale transaction and surprised to receive a form 1099-c.

Below is information for sellers of potential short sale transactions.

A short sale in real estate occurs when the outstanding loan against a property exceeds the market value of the property and the lender agrees to accept less than it is owed to permit the property to be sold.

The difference or shortage is an expense to the bank or lender and therefore becomes income to the individual(s) with the short sale. Put in simple terms – one’s expense is another’s income. [Read more...]