Income Tax After A Short Sale?

I could not afford the rental property I purchased when I was making more money and

was advised to short sell 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 pay the taxes and now I owe income taxes. Help.

This is a good question, and one we are asked very often. Now, lets 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 may or may not be forgiven in bankruptcy. The factors 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 need to request a tax transcript from the government entity the taxes are due to, to make an accurate assessment, but generally if the taxes were due for the tax year 2005 or before, there is a high likelihood this debt will be forgiven.

Our bloggers tax debt if from the tax year 2008 and will survive a Bankruptcy. Our blogger can file a Chapter 7, if our blogger qualifies, or a Chapter 13.

The good news about 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 interest will be paid, unless the government tax entity has filed a lien against our bloggers property. As long as our blogger successfully completes the Chapter 13 Bankruptcy our blogger will be out from under that tax debt completely.

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. If our blogger qualified for a Chapter 13 only, then our blogger would qualify for a five (5) year Chapter 13. If our blogger qualifies for and files a Chapter 7, the tax debt will survive the bankruptcy. Our blogger may enter an agreement to pay the tax debt in installments with the government tax entity outside of bankruptcy, but the downside of that installment plan is that interest continues to accrue until the tax debt is paid in full.

Want to learn more about bankruptcy? Are you facing income tax from a short sale? The Stone Haven Law Group offers a free telephonic consultation to discuss you situation and the fresh start of Bankruptcy. Please call Stone Haven Law Group at (909) 457-8200 to discuss your options.

by: Mark Haven

POST COMMENT

Which Chapter Is Right For Me? Bankruptcy And Bankruptcy Lawyers Etf Investment: Etf Investment Is The Way To Gain A Risk Free Profit Etf Trading Signals: A Good Way To Invest On Etfs Is To Look For Trading Signals Avoid Bankruptcy With Proper Debt Management: Etf Trading Strategies: Some Tips For You To Develop Your Etf Trading Strategies With Systems Integration Or Programming Projects, An Informed Client Is A Happy Client Filing For Bankruptcy - The Advantages And Disadvantages Beat Bankruptcy Blues Easily! Bankruptcy Advice For Birmingham, Coventry and Stoke. (Part Two) Bankruptcy Advice For Leicester, Derby and Nottingham. (Part Two) Bankruptcy Advice For Leicester, Derby and Nottingham. (Part One) Bankruptcy Advice For Stoke, Coventry and Birmingham. (Part One)