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Have not paid mortgage in 8 months - in foreclosure, but I have now been approved for a short sale. will incur loss of 300,000. Bank will send a 1099 on the short sale - will take 21% cap hit, correct? If so, am I better off going thru foreclosure - will I stil get a 1099? This is not my primary home and was not sure of recourse vs. non- recourse rules??

Realgeni · Joined: 13 Apr 2009 Posts: 1434 99.76 Dollars($)

You cna go for Short sale which is less impact to yoru credit than foreclosure.

You will not pay taxes due to short sale. There is new low which will help you and you will not be taxed. I think it ends in 2010.

smithsussane · Posted: Tue May 05, 2009 7:31 pm Post subject:

Hi mcbmets!

Welcome to forums!

I guess your lender is forgiving the deficient amount resulting from the short sale of the property. That is the reason why he will issue a 1099. This will be considered as your income and the IRS will charge taxes on it. However, depending upon your state laws, the taxes on the forgiven amount can be removed.

I feel short sale is a better option than foreclosure. This is because, it will have a less impact on your credit. A short sale will reduce your credit score by 75-100 points. On the other hand, a foreclosure will lower your credit score by 250 points. You can contact your lender to know whether the loan is recourse or a non-recourse one.

Feel free to ask if you have further queries.

Sussane

Realgeni · Joined: 13 Apr 2009 Posts: 1434 99.76 Dollars($)

Here are the details on the Mortgage Forgiveness Deb Relief Act :
http://www.irs.gov/individuals/article/0,,id=179414,00.html

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