1099 Forgiveness on Lux shorts

[Paul Yevzikov]

Hey experts was hoping to get some clarification:

The debt forgiveness act, which forgives up to $2M forgiven debt subject to taxation when the bank issues a 1099 during a short:

Is it ONLY for the first $2M of the forgiven debt, -or- is it ONLY for loans that were under $2M on primary residences?

Specific situation is a luxury short sale where the loan amount is $2.5M, and approval is for $1.5M.

Will the seller get the 1099 for the entire 1M forgiven between original $2m and my $1.5m purchase, or will it just be the $500k to be taxed between the $2.5 and $2M limit.

Also backup question - if they can show they're insolvent at the time, will the F982 take care of the total amount, or no?

Don't see this everyday, so please advise.

Paul

[James Ward]

The best and safest way to get this answered, is for you to tell the Property Owner to talk to their CPA/ Attorney. You really need to be carefull offering tax/ legal advice without having the proper licenses. If you happen to give out the wrong advice you open yourself up to lots of trouble.

Too many people are out looking for someone to blame for their troubles. So, your well intented advice, might just get you into a world of trouble.