Is there a requirement to pay taxes on the difference in a short sale? 1 Answers as of March 08, 2011

Is there a requirement to pay state or federal income tax on the difference between the loan amount and the short sale price? I understand that the difference is considered income.

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LT Pepper Law
LT Pepper Law | Luke T. Pepper
In most instances, the deficiency which is the difference between the sale price and mortgage value is considered taxable income. There are some exceptions for the 2007, 2008 and 2009 tax years. So depending on when you bought your primary home, there may be no liability for the deficiency. I would talk to a tax advisor about how to best answer this question.
Answer Applies to: Pennsylvania
Replied: 3/8/2011
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