Beware of taxes in distressed sales

Future-Proof: Navigate Threats, Seize Opportunities at ICNY 2018 | Jan 22-26 at the Marriott Marquis, Times Square, New York

Q: Last year was really hard. I got laid off, and we ended up short-selling our home. We thought we were fortunate because we didn't end up with a foreclosure on our record, so we'll be able to buy another home in two years instead of five. We knew the Internal Revenue Service wouldn't tax us on it, under that temporary law. But I just did my taxes and we actually owe the state more than $25,000 in income tax because of our short sale. We thought we were doing the right thing by not just letting the house go, but it looks like we're going to be penalized for that after all. A: The reality is that when you are upside down and get laid off, there is simply no easy solution without implications. This is especially true if you decide or realize that you can no longer afford the place, even if you were offered a modified payment (which isn't the easiest thing in the world to obtain, even if you could afford it). Now, as with all tax topics, there are lots of exceptions and nuanc...