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The bank has to issue the 1099-C, not you, nor do you have to file it.
You should not have to pay any tax on the "phantom" income, so put away the tums.
Hang on a minute & I'll get you the IRC reference that explains why; this was your principal residence; I don't know what's wrong with the bank; they should either get it right or shut up before someone has a heart attack over this;
Here's the reference to the law that makes the exception for principal residences:
However, the Mortgage Forgiveness Debt Relief Act of 2007 (H.R. 3648) changed this for certain loans partially or wholly forgiven during 2007 through 2012. The law provides tax relief if your deficiency stems from the sale of your primary residence (the home that you live in). Here are the rules:
If you don't qualify for an exception under the Mortgage Forgiveness Debt Relief Act, you might still qualify for tax relief. If you can prove you were legally insolvent, you won't be liable for paying tax on the deficiency
Thank you so much!
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If you want, you can ask for me if you have any more questions down the road;
Would you recommend that I hire a tax atty to ensure there won't be any surprises? Or can I move forward with confidence. Appreciate your advice.
What do you want the tax attorney for?
The rep who is preparing the short sale docs to submit to Wells Fargo "strongly recommended" consulting one to understand any tax implications.
There are hundreds of thousands of people in the same boat as you. It has become, no big deal. You just need to fill out form 982 & file it with your tax return for the year that the 1099-C is issued. For the personal residence exception, it is like 2 lines to fill out. Your accountant can do it, I'm sure; you have enough information right here to make sure it is done correctly. I don't what a tax attorney is going to do for you except take your money. If that's what you want you can leave it here. :} I would make sure you are represented by your own attorney at the closing; not just the bank's attorney; that shouldn't cost very much; you need a deed prepared or however they do it in CA or wherever you are................
Rep? whose rep?
Representative of ?
Escrow agent or someone in that capacity?
She is with a title company and is collecting and preparing the documents to send to the bank. She's with a title company. We are not being charged for her services. Is this not customary?
Probably is. Where do you live?
Ah CA........year you use title companies there; I guess I'd be more comfortable if I had a real estate attorney with me to check out any documents before I signed them;
I will sleep much better tonight. Thanks so much!
U R Very welcome............sweet dreams