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Salt Lake City, UT:
Short Sales vs. Foreclosures
Understanding the 1099
Okay, so your friend told you, "Don't do a short sale because you will get a 1099 for the amount the bank writes off." This is true, but there are ways to deal with the 1099-C that you will receive.
The thing that most people don't know or don't tell you is that with a Foreclosure, you WILL STILL get a 1099-A.
What's the difference between a 1099-C and a 1099-A? The 'C' stands for "Cancellation of Debt" and the 'A' stands for "Acquisition or Abandonment of Secured Property". The differences are much more than you get the 'C' with a short sale and the 'A' with a foreclosure.
The tax consequences for the 'C' and the 'A' are the same. You may not even be required to pay taxes on the 'income' as shown on the 1099-C, but don't just assume that you won't have to pay.
Before making your final decision, first consult your CPA or tax preparer. There is a link at the bottom of the form to dowload a worksheet that will help you understand more about the 1099-C and determine if you are insolovent.
In 99% of the cases, the amount of the loss at foreclosure is greater than that of a short sale. So, if you are going to receive a 1099 in either case, it is in your best interest to do a short sale instead of allowing your property to be sold for less at foreclosure or as an REO (Real Estate Owned = Bank Owned Property)
NOW YOU KNOW!! Don't allow rumors and incorrect information influence an important decision in your life. Losing your home to foreclosure is always the last resort and you should seriously look at ALL of your options.
Download the 1099-C worksheet by clicking this link:  Debt Calcellation Worksheet 30.00 Kb
If you have other questions, please feel free to contact us by filling out the form below, or calling us directly at 801-467-7007.
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Copywrite makeforeclosurestop.com 2007. makeforeclosurestop.com is affiliated with Service First Realty Group,
Salt Lake City, UT 84105. 801-467-7007.
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