Thread: short sale - avoiding 1099C

I'm lining up a short sale of an investment property I built, which is worth less than the mortgage. I'm getting it in writing that the bank will not pursue a deficiency agreement against me. How do I avoid having the bank's loss classified as my taxable income? Are there other pitfalls such as these I'm not aware of?

This happened to me...there is a 99% chance that the bank is going to declare the loss an issue you a 1099 for the "cancellation of debt". They will not likely yield on this point--the only reason they agreed not to pursue the deficiency is that they were most likely to get nothing from it anyway.

You need to work this on the Tax site--figuring out if the 1099 income can be forgiven--there are several avenues for that.

The payoff to selling short is the opposite of a long position. A short seller will make money if the stock goes down in price, while a long position makes money when the stock goes up.