How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Mark Taylor Your Own Question
Mark Taylor
Mark Taylor, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 1000
Experience:  Certified Public Accountant
93680669
Type Your Tax Question Here...
Mark Taylor is online now
A new question is answered every 9 seconds

I recently went through a short sale. DCU has contacted me

Customer Question

I recently went through a short sale. DCU has contacted me about the ~15K deficiency on the 2nd loan. They’ve told me that they cannot pursue me for this amount, but because the deficiency is more than $600 they need to report it to the IRS. Apparently, I have two options.
1. They will send me a 1099C for the ~15K that is deficient – and I’ll need to pay taxes on that amount as if it is income. In this case, they will report to credit bureau that the sale settled for less than owed.
2. Enter into a workout loan with DCU for the deficiency and pay it off through monthly payments, in which case they will write it off and report to credit bureau that it paid off.
JA: The Accountant will know how to help. Is there anything else the Accountant should be aware of?
Customer: i need to make a decision about doing the workout loan or just receive the 1099c.
Submitted: 1 month ago.
Category: Tax
Expert:  Mark Taylor replied 1 month ago.

Hi, my name is Mark. I will be happy to help you with your question. You mentioned that there was a $15,000 deficiency on the second loan and that DCU cannot pursue you. DCU will send you a 1099-C for the cancellation of debt. There are two types of debt recourse (personably liable) and non-recourse (not personally liable). If you are not personably liable for the debt this would not be considered income.

Expert:  Mark Taylor replied 1 month ago.

Was the sale relating to your personal residence? Yes, you are correct that this would be reported to the credit bureau agencies.

Customer: replied 1 month ago.
it was my personal residence.
Expert:  Mark Taylor replied 1 month ago.

Ok whether you are personally liable or not for the debt, you would still qualify for the cancellation of debt from your principal residence exclusion. This would be reported on form 982.

Expert:  Mark Taylor replied 1 month ago.

I hope you found this information to be beneficial. If this answered your question please take a few moments to rate my response. A rating is needed in order for me to receive credit for helping you today. The rating bar is located at the top of the page – ranging from 1 to 5 stars. If you need me to clarify aspect of my response or if there are additional areas of the question that you would like me to consider please let me know. I would be happy to continue the discussion. It has been my pleasure helping you today.