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Tax.appeal.168
Tax.appeal.168, Tax Accountant
Category: Tax
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Experience:  3+ decades of varied tax industry exp. Tax Biz owner
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I went through a short sale this past year on my rental

Customer Question

Hi, I went through a short sale this past year on my rental property. (the town wouldn't allow me to rent it out short term for higher rent so I couldn't pay the bills) I also had a 2nd mortgage. 1st loan was $250,000. 2nd was 35,000. The house sold this past June for $185,000. I just received a 1099 from the 2nd mortgage lender for $31,000.They only got $4,000 from the sale. I also received a 1098 mortgage interest for $78,000 from the 1st mortgage. I haven't received a 1099 from the first yet. My question is, will the mortgage interest help me undo the 1099 I may get?
Submitted: 10 months ago.
Category: Tax
Expert:  Tax.appeal.168 replied 10 months ago.

Q: will the mortgage interest help me undo the 1099 I may get?

A: The mortgage interest deduction will reduce your taxable income. While you will be able to claim the $78,000 as a deduction, only a percentage of that amount applies towards the reduction of your taxable income. The mortgage interest deduction won't cancel out the 1099-C income.

For more information regarding mortgage interest deduction, you can refer to the IRS Pub 936.

Link to Pub 936:

https://www.irs.gov/pub/irs-pdf/p936.pdf

Let me know if I can be of further assistance to you regarding this matter.