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I completed a short sale and the lender will not pursue me for the deficiency amount.
My question is concerning taxes on the deficiency amount that the gov't has the right to tax as income.
I know under the Mortgage Forgiveness Debt Relief Act one might be able to avoid these types of taxes on a 'primary residence' that was short sold.
My short sale was on a rental property. Does the Mortgage Forgiveness Debt Relief Act apply to 'rental properties' or only 'primary residences'?
Thanks!
@ilzhoefer wrote:I completed a short sale and the lender will not pursue me for the deficiency amount.
My question is concerning taxes on the deficiency amount that the gov't has the right to tax as income.
I know under the Mortgage Forgiveness Debt Relief Act one might be able to avoid these types of taxes on a 'primary residence' that was short sold.
My short sale was on a rental property. Does the Mortgage Forgiveness Debt Relief Act apply to 'rental properties' or only 'primary residences'?
Thanks!
The Mortgage Forgiveness Debt Relief Act only allows the exclusion for your primary residence. You will still need to report the foriven amount as income but it will not be taxed, you will receive a 1099 from the lender.
The rental property does not typically receive the tax exclusion since it was not your primary residence. You still might be eligible to have some of the forgiven amount excluded under the Insolvency test. See IRS Pub. 4681 http://www.irs.gov/pub/irs-pdf/p4681.pdf