Am I liable for taxes in a short sale? 2 Answers as of June 29, 2011

If my bank accepts a short sale settlement, will the amount charge off count as income, and if so am I liable for the taxes?

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Dorot Law, PA
Dorot Law, PA | Datan Zvi Dorot
The short answer is YES! Generally this type of transaction results in what is called "Cancellation of Debt" income, or COD income. This is generally taxed at your regular graduated rates for ordinary income. I highly advise that you consult an attorney or CPA to specifically address the facts in your particular situation, as there may be some things they can do to minimize this liability.
Answer Applies to: Florida
Replied: 6/29/2011
David Hoines Law
David Hoines Law | David Hoines
If the bank sends you a 1099, you will need to report the income and pays the tax.
Answer Applies to: Florida
Replied: 6/28/2011
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