When someone goes threw Forclosure, do they have to pay some kind of taxes on the sales or is there something that they have to pay?
Your credit pays dearly.
There is an IRS statute that requires that you pay taxes on forgiveness of debt. This “phantom income” problem has been somewhat resolved by a change in the law that exempts primary homeowners from this “phantom income” up to the amount of $2 million. However, investors can still be subject to the tax problem this can create.
However, if you can prove insolvency the problem does not exits. I am not an accountant or an attorney and I suggest you speak to your own if you are the one facing the forgiveness of debt from a foreclosure or short sale.