Are You Able To Escape Taxes On Short-Sale Gain ?

Most of us believe that the normal capital gains tax that has been deferred until 2012 would handle any misunderstanding as to if you owe taxes when you do a short-sale.

Example:

House is worth 400
You owe 500
Bank accepts the 400
Forgive 100

Back in the day, you'd owe taxes on that 100k forgiveness. We have had a reprieve on that and it's been extended.

Talk with your tax guy though if you did a short-sale last year and are expecting not to pay taxes on that 100k.

BETTER YET, TALK TO YOUR TAX PERSON BEFORE YOU EVEN CONSIDER DOING A SHORT-SALE.

Read the article linked here and decide if this is you, or if you are still safe from paying taxes on a 100k 'gain.

Passing The Test On Canceled Mortgage Debt Has Tax Rewards 

Whenever I discuss Short-Sales with a prospective client....'Talk to you Tax person and/or Financial Planner'. Needless to say, I have them sign a disclosure stating the same thing. But, I'm sure others may have forgotten to have this discussion.