Income Tax After a Short Sale

“i could not afford the rental property i bought when i was making more money and was advised to short trade the property, after i short sold the property i received a 1099 from the lender and had to include the amount i was forgiven as income on my 2008 tax return and because of my decrease in income, could not recompense the taxes and now i owe income taxes. Aid. “

this is a good question, and one we are asked very many times. Now, let’s look at that income tax debt caused by a short sale. (had our blogger simply surrendered the rental through a bankruptcy our blogger would not have incurred the income tax debt. )

income tax is a priority debt that can or can not be forgiven in bankruptcy. The components determining whether it will be forgiven are (1) what tax year the debt was incurred, (2) the date the tax return was filed and (3) whether the tax has been assessed. Our blogger will require to request a tax transcript from the government entity the taxes are because of, to make an comprehensive and precise assessment, but generally whether or not the taxes were due for the tax year 2005 or before, there’s a high likelihood this debt will be forgiven.

our blogger tax debt whether or not from the tax year 2008 and will survive a bankruptcy. Our blogger can file a chapter 7, whether or not our blogger qualifies, or a chapter 13.

the good news regarding paying tax debt through a chapter 13 bankruptcy is that the amount of the tax debt is determined at the date the petition is filed, no intentness and interest will be remunerated, unless the government tax entity has filed a lien versus our blogger property. As long as our blogger with great success completes the chapter 13 bankruptcy our blogger will be out from underneath that tax debt entirely.

if our blogger qualified for a chapter 7 but elects to file a chapter 13 then our blogger could be free from this priority debt in as little as three (3) years. Whether or not our blogger qualified for a chapter 13 only, then our blogger would qualify for a five (5) year chapter 13. Whether or not our blogger qualifies for and files a chapter 7, the tax debt will survive the bankruptcy. Our blogger can enter an agreement to recompense the tax debt in installments with the government tax entity outside of bankruptcy, but the downside of that installment plan is that intentness and interest continues to accrue until the tax debt is remunerated in full.

want to learn more regarding bankruptcy? Are you facing income tax from a short sale? The stone haven law group offers a free telephonic consultation to talk about you circumstance and the “fresh start” of bankruptcy. Please call stone haven law group at (909) 457-8200 to talk about your options.