JoshDom1898
Member
What is the name of your state? AZ
I know that when lenders accept money as a settlement to release a person of the obligations of a mortgage/d/t and promissory note, the lender provides that person with a 1099 because the defeciency is imputed income. (so say you short sale your house and you owe $200k, the buyer offers $150k and the bank accepts - the bank gives you a 1099 for the $50k defeciency).
I also know that if the house is bought as an investment house, the 1099 can be offset because you can claim a loss on the property. I also the know the offset is not dollar for dollar.
However, I was recently told that the loss will likely be a capital loss and only offsettable to a certain extent against ordinary income. It will be offsettable against other capital gains if he has any and there may be some carryforward and carryback associated.
can anyone help explain what this means as I don't know much about tax law.
I know that when lenders accept money as a settlement to release a person of the obligations of a mortgage/d/t and promissory note, the lender provides that person with a 1099 because the defeciency is imputed income. (so say you short sale your house and you owe $200k, the buyer offers $150k and the bank accepts - the bank gives you a 1099 for the $50k defeciency).
I also know that if the house is bought as an investment house, the 1099 can be offset because you can claim a loss on the property. I also the know the offset is not dollar for dollar.
However, I was recently told that the loss will likely be a capital loss and only offsettable to a certain extent against ordinary income. It will be offsettable against other capital gains if he has any and there may be some carryforward and carryback associated.
can anyone help explain what this means as I don't know much about tax law.