What Is The Owners Responsability On Tax Loss For Short Sale
I have been looking for information on the irs law in regards to the owners tax responsability with a short sale. The owner is currently employed and has a income does the loss get deducted from the income and the owner pay tax on the difference? What if the owner has no income could they claim solvency and avoid paying tax on the relieved debt? I have seen on here the tax law posted before but I cannot seem to find it.
Thanks,
Nathan 
The IRS views forgiven debt as taxable income. The mortgagee will issue an IRS form 1099 to the Seller in the amount of the forgiven debt.
The IRS imposes several 'tests' to determine under what conditions forgiven debt may be taxed as ordinary income.
If the Seller was 'insolvent' at the time the debt was forgiven, all or part of the forgiven debt may be exempt from taxation, but it's up to the taxpayer to make his/her case.
[addsig]
Theshortsalepro,
What if the owner has income but is unable to make payments can they still claim insovency or does the loss go against their income?
Thanks,
Nathan
If the Sellers are not insolvent at the moment when the debt is forgiven.... they may incur an exposure to a tax liability.
If they have a duty to pay tax... but cannot, or choose not to pay the tax... there are consquences.