Originally Posted by justr8hr
#1;What TAX FORM should I use to record Short Sales or Foreclosure of Residential Property in order reflect/attach them on my FORM 1040.
#2;In addition, how do you get the Fair Market Value of such property. Which website or agency should we inquire?
Thank you so much for your help
#1; Generally, canceled or forgiven debt or a loan modification (change to the terms of a loan) will result in 1099-C taxable income. However, there are very specific exclusions. Generally, if an exclusion applies to the situation, the tax filer will not owe income taxes on the canceled debt.The most common exclusion is for a home that was a primary residence. If the loan was to buy, build or substantially improve a principal residence, and the canceled debt was less than $2 million for married filers, they will qualify for the exclusion and will not be taxed on the forgiven debt. However, those who experienced a short sale, loan modification or foreclosure on a second home or investment property are not exempted under this provision and will be taxed on the cancelation of debt provisions, unless another exclusion applies.Perhaps you were deemed insolvent. If the liabilities you owed were larger than your assets immediately before the cancelation of debt occurred, you do not need to include the 1099-C income in your reportable. SO UNLESS an exception applies, if you transfer title on your home, whether voluntarily through a warranty deed or grant deed, or involuntarily through foreclosure, you have sold your home. You might be subject to taxes, even if you sold your home at a loss, either on a short sale or by foreclosure. The mortgage company is actually the owner of the house. For a short sale to be approved,you, the seller , must submit a completed sale package that includes sellers' hardship letter, tax returns, payroll stubs, financial statements and bank statements to the lender. Since the mortgage company is losing money on the sale they will be reluctant to pay any closing costs or Realtor fees. The benefit of not having to go through the foreclosure process is what drives a lender to accept a short sale. The down side is that the mortgage company could send you a 1099-C for the uncollected balance. If you settle a debt with a creditor for less than the full amount owed, he may be required to report this forgiven debt as regular income on line 21 1040. As long as the amount is over $600 of the principal, the IRS will require that you report the amount on the form as income.
#2;I guess you need some professional help from a r/e appraiser/ a r/e agent . Most residential short sales involve some kind of federally insured financial institution. Hence, federal government definitions of “fair market value” can be applicable.The classic federal definition of fair market value is ;The fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts. As said, a short sale is when you ask your bank to help you out by accepting a payoff that is less than what the bank is owed. This gets you out of the home and avoids costly foreclosure proceedings for the bank. A few different strategies being used by short sale sellers:1)Price the house at or above market value – These sellers may be trying to milk the process to live in the home as long as possible. Continuing effort to list the property may delay foreclosure proceedings, but only for so long. 2)Price the home based on best estimate of the price that the bank will approve – Banks have a process for determining what sale price they will or will not approve on a short sale. The most experienced short sale agents will understand this process and price the property realistically within a range that is likely to be accepted. 3)Price the home very low to get a quick offer – The hardest part of the short sale process is getting an offer in hand so that the bank can start the review process. In their haste to get an offer to the bank, sellers often set prices far lower than will be realistically approved by the bank to get an offer in hand. If a home is worth $300k and the seller lists for $200k, you can be certain that they will get a quick offer, but you can also be certain that the price will not be approved by the bank. However,Every once in awhile, a home will have a listing price that has been pre-approved by the bank. That is a great situation, because they have done a preliminary review and said what they are willing to accept. An offer at the approved price should be accepted quickly, though a bit of negotiation may still be possible.
OR i guess you may visit the zillow.com