Will I owe the IRS taxes on a short sale? 4 Answers as of April 21, 2011

I was denied a modification by my lender. I was preferred to do a short sale. If I sell the house on a short sale, will I owe the IRS taxes on the sale? If yes, can it be reduced or forgiven?

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California's Largest Family of Attorneys
California's Largest Family of Attorneys | Doan Law Firm
Yes. Yes, it can be reduced and/or forgiven. Please contact a tax or bankruptcy attorney.
Answer Applies to: California
Replied: 4/21/2011
David Hoines Law
David Hoines Law | David Hoines
Maybe, so you need to speak with your tax return preparer after the sale.
Answer Applies to: Florida
Replied: 4/20/2011
Meyer & Yee, LLP
Meyer & Yee, LLP | Kent W. Meyer
It is possible that you will owe taxes on the property if you had a second mortgage or used the property as an investment property/rental. If these situations do not apply it is likely that the debt will be forgiven.
Answer Applies to: California
Replied: 4/20/2011
The Davies Law Firm, P.A.
The Davies Law Firm, P.A. | Robert F. Davies, Esq.
You will be at risk for having to pay taxes on 'forgiveness of debt' income. This is a really nasty situation where you owe taxes on money that you did not and can not pay. You should talk with a tax attorney or an accountant. I am not a tax attorney, I handle other areas of law. However, if you contact me, I will put you in touch with two very fine accountants who are friends of mine.
Answer Applies to: New Jersey
Replied: 4/20/2011
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