Short sell

[NevadaLSUfan]

We are going for the short sell on our home, but have been told by the lackeys (front line people) at Countrywide that they can 1099 us for the difference. Our loan officer said that in NV, we have "anti-deficiency laws" which means that CountryWide cannot 1099 us for the difference on the loan balance. Can anyone help me find out the truth on this?

My understanding is if they give us a 1099, that could result in thousands of dollars of taxes having to be paid based on a percentage of "amount due" and at a tax rate set by the IRS.

Thanks!

Fortunately for most, the Mortgage Forgiveness Debt Relief Act of 2007 was signed into law by former president George W. Bush that year. At least for federal tax purposes (which used to tax the difference between what was owed on the home and the reduced rate it sold for), this tax burden has been removed, though the Act is set to expire on December 31, 2009.
This can lift a huge load off many an owner's back. Previously, the short seller was looking at a substantial federal tax on the sale. Unfortunately, though, many states have not followed suit and will still tax the difference, which can be quite large, in some cases. As an example, let's say that a home that had a mortgage balance of 400, 000 dollars short-sold for 250, 000 dollars.
In some states - many of which tax at 9 percent or higher - a seller will still be looking at a significant payment to be made, especially if the bank issues them a federal Form 1099, which they must, by law, do. In this case, it behooves the home seller to take on the services of a tax negotiation service in order to arrange for repayment or reduction (or even forgiveness) of the amount of the tax.
While the federal law on the books currently (and it may be extended further) is clear, it's best to check the short sale tax laws in each state in order to gain an understanding of what may or may not be owed upon final sale and transfer of title from the old owner to the new owner at closing. Remember; forewarned is forearmed.

The bill to extend the Mortgage Debt Relief Act of 2007 which "allows taxpayers to exclude income from the discharge of debt on their principal residence" has been extended to 2012.