Will the Client Receive a 1099 from the IRS?

This is a very common question and concern.

The answer currently is: Maybe

A current Federal Law may prohibit a Lender(s) from sending the home owner a "1099" for a deficiency (unpaid principal balance negotiated through a short sale) through the end of 2012.

However, in certain scenarios a client may receive a 1099 and some additional forms and documents may need to be submitted to the IRS. You can reference IRS publication 544 where you will find more information on page 3 on the right hand side under "Cancellation of debt". Based upon this publication most tax advisors would conclude that cancellation of debt on a personal residence is not taxable. Your accountant or tax advisor would file form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment), to report the income exclusion. If the property is investment property your accountant or tax advisor would use form 4797.

ZOOM! Loss Mitigation Specialists highly recommends that home owners seek the advise and guidance of a professionally licensed tax advisor.

Please call us at 1-801-527-2011 or simply e-mail us at Questions@ZOOMLossMitigation.com with any additional questions.

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