by Walter Wetterman, Attorney at Law

Tax Consequences and How Tax Law Kicks You When You’re Down

To begin, this article is limited to the disposition of your principal residence.

We hope you are reading this before negotiating a short sale of the home or, even worse, facing a foreclosure sale. Both the short sale and the foreclosure bring into play three tax traps:

Cancellation-of-debt income

Reduction in basis and tax attributes

Capital gains

Before getting to the traps, let’s review some basic terms that you need to know.

Basic Terms

Short sale. A “short sale” is the sale of real estate at a price that is less than (“short of”) the balance due to the mortgage lender.

Foreclosure. A “foreclosure” is a proceeding brought by a mortgage lender ... Log in to view full article.