Short sale cash contribution for PMI..

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Submitted by SHILOH on December 8, 2010 - 8:48am

I am looking for insight regarding taxes on "cash contribution for PMI. Would the buyer pay tax on this as a cash contribution or would the seller?

On this short sale, the PMI issue has come up after scheduling an inspection...at the end of the short sale negotiation. Seller's bank wants 20K cash for PMI -up from previous demand of 5K. The buyer realtor negotiated to bring the selling price down - in which case the buyer could pay the $20K (buyer had previously agreed to pay 5K to cover PMI.

This home is a fixer and has not been inspected yet or appraised.

Thanks for any help....