IRS Home Foreclosure and Short Sale Q&A
September 18, 2007
With the recent changes in the housing market there has been a rise in
foreclosures as well as a rise in short sales. In a short sale, a home is
sold for less money then what is left to pay off the mortgage. When this
happens, a lender may be willing to forgive the remaining debt. However,
both of these sales have tax consequences that need to be addressed before the
sale of the house. For example, in a short sale, the amount of debt
forgiven is taxed as income and will be included in your yearly tax
return. The IRS recently posted a Question & Answer bulletinto help
address some of these questions. The Q&A can be found on the home page
of the IRS: www.irs.gov or directly at:
http://www.irs.gov/newsroom/article/0,,id=174034,00.html.
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