Tax Consequences of Short Sales in Tampa Florida. Short sales are carried out when person who has a mortgage loan on home he is not currently living in which is larger than actual value of the house. The lender allows him to sell the house at actual value and settle the debt and the extra money which he owes to the lending bank as part of mortgage is forgiven. But this does not excuse the debtor from paying income tax on the sale value of the house which he used to pay of the debtor. This ability to escape from home mortgage excited people in Tampa Florida and they happily sold off their properties in short sales.
Tax consequences of short sales – At the height of financial crisis in 2007 an act was passed called Mortgage Forgiveness Debt Relief Act which was in force till 2012 which provided tax relief to people who sold their homes under short sales and gave the proceeds of the sale to mortgage firm to finance the debt. Now that the law’s tenure is over, home-owners selling buildings in a hurry to pay debts to bank or lender have to pay tax on the sale amount which is considered as income by I.R.S. Since borrowers in general were unaware of this tax they saw their bank savings being wiped off as IRS deducted the money without warning.
Tax forgiven by I.R.S. due to the Mortgage Forgiveness Debt Relief Act of 2007-2012 is applicable only on one property chiefly in which the debtor is staying with his family. If the debtor or more land or homes where he does not reside presently and has not stayed in that place for a long time. The income tax forgiven under this law was subject to several conditions which are:
- Property is brought as personal residence or investment
- Property title as joint tenancy or entireties tenancy
- Duration of property ownership
- Is the property owned by an individual or corporation or LLP/LLC?
- Value of debt written off by lender after short sale
The tax consequences of short sales are unpredictable as well as devastating as many home-owners in Tampa Florida recently discovered. People who have lost houses and their savings have set an example for others that it living a simple frugal and simple life is better than taking loans to live beyond one’s actual financial means.
If you have any questions about tax consequences of short sales in Tampa Florida or would like to speak to us about your options, please contact us at (813) 518-7411.
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