[JackB]

Hi,


In may 2006, my partner and I bought a rental property in Orlando. In the deed, I have 40% and my partner 60% of the property. However, it was my partner's wife who borrowed the money and although we (all partners and spouses) signed the mortgage, my wife's partner was the only only one who signed the Note.

For all those years we have lost money on the property and the value plumeted from what we paid, that is, $280k in 2006 to $60k now. I have reported my share of the loss as well as my partner in the last 3 years. So far the accumulated loss is $25k (40% & 60% split) and the accumulated depreciation is $22k (split as well)

We have a first mortgage for $220k and a second for $28k. We stopped paying 8 months ago and started to negotiate with the bank.

We offer the property in short sale (approved by the bank) and now have an offer which the bank has accepted. We are suppose to close on the 30th of June. ON the 2nd mortgage the bank will $3000 and it will give us a 1099C for $27k. On the fisr one they only said they will give us a 1099C for did not mention the amount.

We are concern with the potential tax liability of both 1099s. My questions are:
1) Are we better of going to foreclosure or shorselling?
2) If foreclosre is worse, how can we minimize the tax liabilities?

Assume the 1099C will be issued to the one who signed the note (my partners wife), so are we better off ammending prior returns to get the property out, so my partners wife declare it in a separate return?

How can we best minime our tax liabilities if we move forward with the short sale?
Thanks.

[AtlantaTaxExpert]

In direct response to your questions:

1) You are better off short-selling, because you have some control of the tax fallout in that you can negotiate how much is reported on the 1099Cs.

I see no benefit for amending the returns.

You need to get face-to-face tax advice from a tax professional who can review ALL of the finances of everyone involved and the returns involved to get proper answers to your questions.