Tax Law (Questions About Taxes)/Short Sale of Home

Advertisement

Expert: John Stancil, CPA - 7/8/2009


Question
Hi. My spouse and I currently hold a mortgage with my mother in law on it, as well. We were trying to refinance to get my mother in law off of the loan, but cannot because the house is now valued less than the mortgage. We have only lived in the home since Nov of 08 and the value then was above what we had take out the mortgage for. We are now in the process of possibly short saling our home due to cut in income and personal hardship.Can you tell us what the tax ramifications are as far as a 1099 and how we may avoid this? Also, since my husband and I do not have many assets, we are not overly concerned with short saling, but as for my mom in law, she has many,  and would not want the IRS to come after these. Can you advise of how we can find out more information on this serious situation? I thank you very much.

Answer
Eva,

Thanks for your question.

Since you have not lived in the home for 24 of the past 60 months, you do not qualify for an exclusion.

You will owe tax on the difference between the amount owed and the proceeds from the sale.  You will have to check with the lender to see if they will issue a 1099 just in you and your spouse's name and SS number or if they will also issue one to your mother-in-law.

This link may be of some use. http://www.irs.ustreas.gov/newsroom/article/0,,id=174034,00.html

Hope this helps.

John Stancil, CPA

Tax Law (Questions About Taxes)

All Answers

Answers by Expert:

Ask Experts

Volunteer

John Stancil, CPA

Expertise

I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I teach tax and accounting at a small church-related college. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a part time tax practice for over 35 years. I am a member of the AICPA, National Association of Tax Professionals, and the Institute of Management Accountants. Visit my website at www.johnstancilcpa.com. Also visit my blog, www.thetaxdocspot.com. Prepare and file your own taxes at www.1040stancilcpa.com

Experience

I hold a doctorate in Accounting, and four professional certifications: CPA, CMA, CGMA, and CFM. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 30 years and have taught accounting and tax at the college level for over 30 years.

Organizations
AICPA, FICPA, IMA, NATP

Publications
The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly.

Education/Credentials
DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill College

©2012 About.com, a part of The New York Times Company. All rights reserved.