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Tax Return after Short Sale question

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  • HopelessInWA
    started a topic Tax Return after Short Sale question

    Tax Return after Short Sale question

    I understand that the difference between what we owed and what we sold the house for will be reported on a 1099 and that we can fill out a form 982 to be relieved of the debt.

    However, I have a friend who short sold her house a couple of years ago (I would say 2008 or 2009) and when she got her tax forms, her bank sent her something (a 1099?) showing she paid a ton of interest that year. Basically, they applied the income form the short sale to the interest first, then she got a statement saying she paid all that (in reality she didn't make a single mortgage payment that tax year) and she ended up getting a big refund because of it.

    Is that a crazy fluke, or can/does that really happen??

  • HHM
    replied
    Sounds like a fluke, definitely not common practice.

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