A short sale can cost you money
If you did a short sale on your property, you could be in trouble. When a lender agrees to take less than what is owed on your loan, you are liable for paying tax on that amount. It’s really a forgiven debt and is considered as ordinary income to you and taxable. How would like 100k of income that you never received added to your taxable income?
There used to be a law called the Mortgage forgiveness debt relief Act which forbade that from happening. However, it expired last year because of congress ineptness and in-fighting. Congress is set to vote again on this act. Hopefully it would be retroactive if you sold last year.
I suggest that you write your congress person and tell them you support this.
On the selfish side, if you were trying to talk a homeowner into selling you his slightly upside down house, or doing a long term lease with option rather than doing a short sale, you might mention this fact.
Hey, just saying!!!. I am an investor after all.
