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Todd Willhoite
  • Attorney
  • Claremore, OK
60
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125
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Short sale and income tax consequences to seller

Todd Willhoite
  • Attorney
  • Claremore, OK
Posted Jan 2 2017, 08:43

I entered into a short sale contract June 3, 2016.  The bank has taken a long time to approve and now they say we need to close in 3 weeks.  The seller is now concerned that he may have income tax liability on the amount of debt that is forgiven.  He now says he won't close.  Bank has already gotten a judgment on him.  Seller's thoughts are "I will just let it sell at sheriff's sale and then when they get their deficiency judgment I will file bankruptcy and be free and clear with no tax liability."   Does anyone know what the income tax implications are to the seller either way?  What is the motivation for the seller to sell now if he has to pay income taxes on say a $30,000 forgiveness of debt?

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