Can a Lower Short Sale Price be Better for a Seller’s Tax Situation?

Believe it or not, a lower contract price on a short sale can actually be better for the seller.  I know…I know… it sounds ridiculous, right?  IRS 1099-C rules will come into play, and so a short sale attorney or tax professional should be consulted.  This should really happen BEFORE a seller agrees to ANY short sale offer, as there could be cases in which the seller should sign the lower offer if given a choice.

Kudos to Karl Falk, owner of Summit Mitigation Services, who wrote this article for ActiveRain, a real estate blog site.

Instead of re-inventing the wheel here, I suggest you read the article.  It’s brief, and there is a great real-life scenario in which a $30,000 reduction in contract price translated into a $100,000 savings in tax liability!

For more information, consult IRS Publication 4705 – Tax Relief for Struggling Homeowners Brochure.

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