Legal Question in Credit and Debt Law in New York

short sale taxes ?

Hi, I am trying hard to sell my co-op

apt the last few months. No luck. I

received a letter from Chase a few

days ago, stating the apt would be

sold at auction soon. I am trying hard

to get a buyer for a short sale within

days. I am worried though, if a short

sale is done, that the amount saved

in the short sale will be billed to me

in taxes. I have very little money to

live on right now. A big tax bill would

be a bad thing. What can I do in a

short sale to ensure I wont be taxed

for the excess amount? Thank you

very much.


Asked on 7/10/09, 3:20 pm

1 Answer from Attorneys
Frank Loscalzo Law Office of Frank Loscalzo

Re: short sale taxes ?

A short sale is where you sell the asset (usually house, condo, co-op) for less than what you owe.

The price it is sold for, is based on its real

value (what it could be sold for now) plus all the fees the real estate broker, title company, and attorneys can suck out of it.

The end result of a short sale, is that the bank deducts the money they receive, from the money that you owe. "You Still Owe The Difference"!

By way of example: If you sell your home for $100,000, but the mortgage loan is for $150,000, you still owe the bank $50,000.

The bank rarely forgives this debt. By forgive I mean they formally declare that you no longer owe them this money. Now here is the answer to your question. If they did forgive this money, the $50,000 would be income to you. they would send you a 1099 and you would have to pay taxes on this. You will need a tax professional to tell you what your actual liability is.

So the question becomes who do you want to owe money to, the Bank, or the taxing authorities.

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Answered on 7/10/09, 9:13 pm


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