My Question is about 1099’s…

I have to decide to Short-Sale or just let the house Foreclose, and I’m hearing that it may be better to just the let the house Foreclose, and that way I will get a 1099A, which is supposedly better than a 1099C.

I hear that the 1099A is NOT a “Debt Forgiveness” and therefore a different kind of 1099, and being in a Non-Recourse, Anti-Deficiency State, that would be better than the 1099C, which is “Debt Forgiveness.”

What led me to ask the question and is making me think a Foreclosure is BETTER than a Short-Sale in Non-Recourse, Anti-Deficiency Arizona is this post by someone…

“On a Short-Sale, the forgiven debt (Deficient Balance) is treated as INCOME by the IRS, and on a Foreclosure, the Deficient Balance is still debt, so the IRS has NO Jurisdiction over it for the purpose of calculating your income.”

WHAT Do I Do? Foreclose or try to Short-Sell?

I am less concerned with my Credit than having to pay a BIG Tax Bill on a 1099.

Here is what is on the IRS Website…

IRS Website - “Home Foreclosure and Debt Cancellation”

Is Cancellation of Debt income always taxable?

Not always. There are some exceptions. The most common situations when cancellation of debt income is not taxable involve:

*Non-recourse loans: A non-recourse loan is a loan for which the lender’s only remedy in case of default is to repossess the property being financed or used as collateral. That is, the lender cannot pursue you personally in case of default. Forgiveness of a non-recourse loan resulting from a foreclosure does not result in cancellation of debt income.

I lost my home through foreclosure. Are there tax consequences?

There are two possible consequences you must consider:

Taxable cancellation of debt income.(Note: As stated above, cancellation of debt income is not taxable in the case of non-recourse loans.)