Important tax Information with regards to Short sales and debt cancellation Is nearing Expiration

 

“Phantom Income” as it is affectionately referred to, is the difference between what you owe on your original mortgage and the difference that the bank settles for. Your lender will 1099 you for this difference. The IRS link that I am providing explains how that deficiency can be written off and no additional income will be added to your tax basis. This Tax Law will be expiring in 2012 and could create major tax debt for those looking to Short sale or process distressed property through foreclosure after Expiration. Normal time frames for loan Modification, Short Sales or even a completing the Foreclosure process is an average of 7 months. Can you imagine how inundated banks will be after most of the general public finds this out? Thus Making completion of any of these within a year near impossible. You should know this now, and decisions should be made to protect yourself from this

 

If you complete a short sale or your property is foreclosed on prior to the end of 2012 and you meet the qualifications provided in the IRS link you wil not be responsible for any additional taxable income.

However, if you complete either of these above AFTER this expires in 2012, you WILL be held responsible for the difference as taxable income. This is a huge cause for concern for those Depending on their Mortgage company's ti make good  on  Promises to finalize Loan Modifications. Some may be left with very little time to complete a Short Sale or even force the bank to foreclose prior to the end of 2012. This will leave these Distressed and Strategic Defaulting homeowners holding the Bag.

 

Here is an example

If you owe $300,000 on your property, and your property sells for $200,000, at a 35% tax rate, the settlement difference of $100,000 @ 35% is $35,000.  This is going to be the same whether it is completed through short sale OR foreclosure. 

 

The possibility of owing the Federal Government is certainly enough to frighten most

 Please contact me for a more detailed evaluation