Posted on: 25th Jan, 2010 09:30 pm
I want to know if the tax ramifications warrant a short sale or should I just foreclose?
If you short sale your property, you will have to pay off the deficient amount to the lender. In that case, there would not be any tax ramifications of a short sale. However, if the lender forgives the balance amount, then the IRA would consider this as your income. However, if the Mortgage Debt Relief Act is applicable in your state, then you won't have to pay taxes on that forgiven amount. In my opinion, short sale of the property is a better option than foreclosure.