What are the tax ramifications of 1099′s for forgiven mortgage debt?
The Mortgage Forgiveness Debt Relief Act, which was extended to December of 2012, exempts acquisition or home improvement debt on one’s primary residence from taxation. The limit is $1 million for single or $2 million for joint tax returns. Many agents tell their short sale sellers not to worry about a 1099-C (“C” stand for Cancellation) without asking their client if they pulled money out of their home through a refinance and what they used the money for. That’s definitely a liability issue for the agent! How should potential deficiency judgments be addressed? This is not a question an agent should discuss with their client. You can talk about possibilities, but should refer your client to an attorney and or CPA. If your seller receives an unexpected deficiency judgment after you sell their home, who do you think they’ll sue? Also note, that most 2nd mortgage lenders will not give up their rights to pursue a deficiency judgment in the future. When should a seller client sign or not si
