VA shortsale,, will we have to pay taxes on the difference between sale price and loan amount?

I recommend you check with your tax preparer since those of us on this forum are not tax professionals and therefore prohibited from offering tax advice. Thanks and good luck.

Be sure your short sale negotiator insists on "no deficiency judgment". You may be protected by existing legislation, if this is an original purchase loan.

Too many missing factors to properly advise you.. , but in general, currently the IRS has the "The Mortgage Forgiveness Debt Relief Act and Debt Cancellation" which is valid through December 31, 2013. If your selling your primary residence, and the loan is the same loan you took out when you purchased the home, or you did a "rate and term" refinance, but you did not do a "Cash Out" refinance, then it's possible you would not be subject to taxes on the phantom income. Your accountant/CPA who is familiar with your entire scenario would have a better idea of your liability. If you'd like to read the details of this program yourself, here's the link.. http://www.irs.gov/Individuals/The-Mortgage-Forgiveness-Debt-Relief-Act-and-Debt-Cancellation- I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 WilliamAcres.com

Check with your CPA. If it was your primary, there is tax forgiveness on all short sales thru 2013.

unlikely if the agreement is structured correctly - get legal or accounting advice from a professional to make sure.

Your default assumption should be yes. A CPA will give you the best answer. I know a CPA is more expensive than a normal tax preparer - this is an important consideration and the extra money spent will be well worth it. Please know that the answer will require more information as it is not a simple yes or no question.

You shouldn't have to pay taxes on it as long as it sells prior to Dec. 31st. 2013. But of course your best source would be the IRS directly.

Consult your tax preparer and/or a tax attorney... But generally speaking, a creditor will issue a 1099 to you for the difference. That then goes on your tax return as income. There is a Mortgage Debt Relief law on the books, that I believe is good through the end of 2013 that would make it so you don't have to count that 1099 "income".