Short sellers usually owe Uncle Sam $$ money... but that may change...

For the longest time, Uncle Sam has considered that any money a homeowner gets from a second mortgage - that isn't paid back to the lending agency - is taxable income. That means, if you default on your home loan - and also never pay the 2nd mortgage - you face getting a tax bill from the IRS asking for income tax to be paid on the amount of money that you received from the second mortgage.

Now the federal government is considering relieving that extra IRS penalty for distressed homeowners. That's good news since short selling is often the most efficient way for a distressed homeowner to relieve themselves of their fiscal problems.