Are there tax consequences on a short sale?
“Whenever you do a short sale, one of the things to understand is that it is a forgiveness of debt. The very definition of a short sale is that you are selling the property for less than what is owed to a bank. So, when the bank forgives the debt-for them it becomes a loss, for you it becomes an earnings. So, you will have to declare that difference that has been forgiven as earnings. However, because of certain tax codes and certain regulations, if it’s your primary residence, you may not be obligated to pay any taxes on that earnings. Your best bet there would be to talk to an accounting professional to see if there are any tax obligations in your specific circumstance.”
