Taxes/Deficiency on Short Sale or Foreclosure?

[website2560]

What is the name of your state (only U.S. law)? NY

I'm either doing a short sale or foreclosure on my home in Suffolk County, NY.

Will I have to pay taxes to IRS and/or owe money to bank for short sale or foreclosure?
The house has negative equity and has been in foreclosure status since Oct 2011.

Please help!!

 

[FlyingRon]

Neither of those incur tax liability but may lead to events that do.
If the bank forgives the deficiency from the short sale (and many do not these days, they just release the lien so the house can be sold but reserve further recourse) or the foreclosure sale, then the forgiven amount is considered taxable.

You might however qualify for relief from this tax if you qualify: http://www.irs.gov/individuals/article/0,,id=179414,00.html