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tax effect of short sale on rental property?

Asked by: megan 736 views YA Discussion

if i short sell my rental property for lets say 100,000 and my basis is 250,000 and the loan is non-recorse and depreciation is about 20,000 would i be able to claim a loss on my taxes of 130,000 since it was a rental thus offsetting all my wages and me owing no tax at all and getting all my withholding back?? since its non-recourse any cancelation of debt would not have to be included in income, correct?

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1 Answers



  1. the tax lady on Sep 22, 2011 Reply

    You need to hire someone to do your taxes. (Especially given your past history of screwing up returns.)

    You would still do a schedule E, claiming any deferred passive losses.
    You would do a form 4797, showing the sales price as the amount of the loan balance (since it’s non-recourse). You’d compare that to your adjusted basis (what you paid less depreciation) to determine your loss. If your loss is more than yuor wages, you may even have an NOL and can carry the excess loss to other years.

    I’m curious as to how you got a rental property with a non-recourse loan. Your other posts don’t really suggest you had a residence that you converted to a rental.

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