Question
In a short sale of a house, can we deduct the 1099 amount from our actual loss from the sale?
Say we bought a house for $600,000 with a $400,000 loan on it. The house is now worth $200,000. We've owned it for 4 years now. Loan balance is $400,000 because we paid interest-only on the loan. Upon short sale approval for say $200,000, the mortgage company will give is a 1099 income of $200,000. Can we deduct from the $200,000 income our loss in the sale of $200,000? Any input is appreciated. Thanks.
4 weeks ago - 3 answers
Best Answer
Chosen by Asker
No, you gained the 200k, it was the bank that lost it. They write it as a loss, you as a profit. You pay income tax on it.
by Janet P
4 weeks ago
Asker's Rating: 
Other Answers
no you just pay taxes on the amount. Just because the value dropped on this home has nothing to do with your tax basis on the lenders loss
by golferwhoworks- 4 weeks ago
If it was your primary residence, you won't owe any taxes on the forgiven debt due to the "Debt Forgiveness Act of 2007".
by Mike- 4 weeks ago