Short Sale Lender issues a borrower a 1099 I am a CA Real Estate Broker whose client is a CPA. He has a rental property encumbered by a 1st and a 2nd loan with Bank of America (B of A). I am doing a short sale for him but he now insists that he will only agree to the short sale is B of A provides him with an "unconditional release" from his mortgage obligations (i.e. B of A won't pursue a deficiency judgment against him in the future) for his 1st loan. He understands that he is liable for his 2nd loan. He came into possession of a B of A short sale letter for another borrower (which he would like to receive) which relieves the borrower from a potential future deficiency judgment but it is conditioned on the fact that the bank will issue a 1099 for the outstanding balance owed by the borrower. My question is whether the issuance of a 1099 means that this particular borrower will be liable for the taxes owed on the outstanding balance for the tax year in which it was issued? Wouldn't it just be better for the borrower to accept a short sale which merely reserves the right of B of A to pursue a deficiency judgment in the future? |