Will every short sale come with a 1099 after for the "forgiveness tax" if so how is it calculated? Is there a way to get excused from the tax, being its not "real cash" its ghost money? Thanks

Of course it's real money. The bank lost the promise of real money, not Monopoly money.

As far as tax consequences, you'd be wise to purchase some advice from a licensed CPA or tax professional.

Behaviors have consequences, real ones.

Get yourself a copy of that popular IRS Publication # 4681, entitled:

Canceled Debts, Foreclosures, Repossessions, and Abandonments.

That should clarify it for you.

The bank will typically either issue a 1099 to the homeowner and write off the loss or try to pursue the deficiency from the homeowner and collect. They cannot do both. It would be like getting the best of both worlds.




*This is not to be considered as legal advice or tax advice. This is only my personal opinion.

IRS requires the 1099 to be sent if the bank forgives the debt. This is better than a deficiency judgement, don't you agree? Look up Mortgage Forgiveness Debt Relief Act of 2007. If this home was your sellers primary residence it is likely they wont have to pay the tax.

Don't get into giving tax advice. Steer your customer towards a CPA.

Read this
http://www.irs.gov/pub/irs-pdf/p4681.pdf