Legal Mumbo Jumbo - 1099's???

Hello Legal Mumbo Jumbo-ites!
As promised, the topic for this week is the ever popular 1099 and it's implications concerning short sales and deeds in lieu of foreclosure.

A few interesting points:
Generally speaking, where there is debt forgiveness, the forgiving debtor is required to issue a 1099. That reality leads to the potential result that when your short sale is accomplished, you just traded a creditor (your lender) for a supercreditor (the IRS). Pause and reflect on this . . .
There are situations where the 1099 is not a detriment but rather a benefit.  For example, if you're insolvent or have lost a great deal of equity, a 1099(c) may not bear significant tax ramifications and having received it signifies forgiveness of the debt and the liklihood that there will be no further action by the debtor (i.e. deficiency judgement action).

If the 1099 concerns debt forgiveness on a primary residence, the debt is exempt under current federal legislation.

The key is awareness and discussing the ramifications of any short sale or other debt settlement with a competant tax advisor.


Until next time loyal friends.  SJG