I am not a tax expert so what follows below is only for informational purposes and should be used as a starting point to further investigate the potential tax savings involved. It is absolutely worth your seller’s time and money to consult with an expert in these matters as it could save them thousands of dollars.

• Can I avoid paying taxes on the forgiven debt if I was insolvent at the time of the short sale?
• Do I have to file bankruptcy to be considered insolvent?
• If you already used a short sale and paid taxes can you file an amended return and get a refund?
• Does your real estate agent understand any of this?
• Do you have to surrender your property in bankruptcy to be eligible for relief?
• Does a form 982 have to be filed in order to be eligible for tax relief?

These are just a few of the questions that should be asked. But, it may very well be worth it. You can find Form 982 on the IRS web site located at www.irs.gov/pub/irs-pdf/f982.pdf