Can anyone tell me if a house is sold on a short sale or foreclosed on, do you pay taxes on the loss or pay any taxes at all?
Yes, the homeowner may have to pay taxes on a short sale.
The bank and the IRS recognizes a short sale as a gain. That is, the difference between amount owed and amount disc. equals the gain and amount taxable
That being said, sometimes homeowners will not have to pay taxes on the gain after claiming insolvency with their accountant.
Do a google search for “Phantom tax foreclosure”
The latest news is that they are working to eliminate this tax.