Posted on: 23rd Mar, 2010 07:41 am
Paid 1.25 million for mixed use office condos bought 5 years ago (could be used for residence could be used for business) currently highest shortsale offer for all 5 condos is 300,000. Used for my office and then had to move currently vacant. If I had a downpayment of $250,000 my loss on the property is 1 million. If the short sale is approved I would have a 700,000 forgiveness of income on my 1099C. Would that be treated as ordinary income and would my 1 million dollar loss be treated as a capital loss. As I have anything that would qualify as a capital gain ever, would I have to pay tax on the 1 million dollar loss from the business.
Hi shrt,
The debts forgiven on a business property does not qualify for the tax relief under the Mortgage Forgiveness Debt Relief Act of 2007. Thus, if there remains a deficiency of $700k from the short sale of your business property, it will be considered as your taxable income by the IRS. As far as the capital loss is concerned, if the adjusted basis of the property is more than the money you realize from its sale, it will be considered as your capital loss. However, you should consult an account or a tax advisor regarding the discharge of debts and the capital loss before filing your taxes.
The debts forgiven on a business property does not qualify for the tax relief under the Mortgage Forgiveness Debt Relief Act of 2007. Thus, if there remains a deficiency of $700k from the short sale of your business property, it will be considered as your taxable income by the IRS. As far as the capital loss is concerned, if the adjusted basis of the property is more than the money you realize from its sale, it will be considered as your capital loss. However, you should consult an account or a tax advisor regarding the discharge of debts and the capital loss before filing your taxes.