Will I get a 1099 ifI shortsell, do a dded inlieu or allow my rental property to be foreclosed on?

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Will I get a 1099 ifI shortsell, do a dded inlieu or allow my rental property to be foreclosed on?

My wife and I bought our first home about 6 years ago in a kinda ghetto neighborhood because that was all we could afford. As the years passed we had 2 children and decided it was time to improve our living for the sake of the family. We qualified for a 2nd mortgage and bought another house and made our first home a rental. However, the rental did not work out (too many problems and could not rent the house for the mortgage amount). We are trying to sell it.

Asked on October 26, 2011 under Real Estate Law, California

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

The 1099 is just a form; while it helps you (and the IRS) track income, whether or not you get a form 1099 has no affect on the *real* question: did you earn taxable income?

The proceeds from the sale of an investment property (e.g. a home you rent out) are taxable. But the issue is whether receive any proceeds. In this context, IF you make a profit, that's income. If the home is sold for an amount equal to the remaining principal balance of the loan (as in a short sale approved by a bank), or for less than the remaining balance (so you


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