I have a quick question I hope you could answer regarding the short sale of the house that I quit claimed to my ex in 2008: will I owe taxes on the difference in the short sale (loss) of the home. I live in FL now and that condo has not been primary residence, although it was my ex's primary. The divorce decree says my ex is responsible and that I am held harmless. If the IRS says I owe and sends a 1099, what can I do to protect myself? I am wondering if this would be viewed as a secondary residence being that I own a home in FL.
1 Answer from Attorneys
The terms of most short sales exclude any liability or responsibility for such
taxes. If your marital settlement agreement includes a hold harmless provision for
such liability, that is further assurance that you owe no taxes for the loss on the
mortgage, the forgiveness of debt, or other result of the short sale. The IRS will
not send you a 1099 regarding the matter unless it is reported as such by the
mortgage holder or party in the short sale. You should not pay it unless you
have signed documents, including the short sale, which commits you to pay
the debt.
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