Short Sellers Facing Tax Increase - 8 News NOW

Short Sellers Facing Tax Increase

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LAS VEGAS -- When the real estate bubble burst, Congress put in place the Mortgage Debt Relief Act, relieving homeowners from paying taxes in a short sale. That provision is set to expire Dec. 31.

Homeowner Cindee Spencer said she wonders if the relief does more harm than good.

"Where's the justice in all this," she said.

Spencer has tried to short sale her home the last six months.

"Nobody is agreeing to anything and it's like this is going on and on," she said. "They want this and you give this; they want that and you give them that and it's just they can't seem to everybody agree."

Spencer, a retired casino dealer, said she wants at least $100,000 for her $300,000 home.

"I mean, I'm losing out all the way around, but I just didn't want two walk away," she said.

But Spencer and homeowners like her could pay thousands of dollars if nothing happens in the next eight weeks.

Tax attorney Kenneth Burns said how much homeowners will owe depends on the price of the home.

"If a short sale isn't completed before the end of this year and Congress allows the Mortgage Relief Act to expire Dec. 31st, then the debt that was forgiven will be taxable," Burns said. "The amount could be staggering; if someone had a $100,000 in forgiven debt, they would be facing an extra tax bill of perhaps $20,000 to $35,000."

According to the Greater Las Vegas Association of Realtors, about 3,000 homes are sold per month, about half of which are short sales.

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