Recently a client asked me the following  question:  "I have an Equity Line of Credit (known as a HELOC), of which I spent 25% on home improvements, 25% spent on items other than home improvements, and 50% remaining unused.  If I successfully complete a short sale, what percentage of my HELOC will I have to declare as ordinary income?"  I consulted my Chief Lender Coordinator, Vanessa Lidell of Shortsale Plan to help us answer this question:  "My first comment would be if there is any money left in the line, the seller should immediately return any unused funds and freeze the line for the duration of the short sale.  You don't want to be in a short sale and find the seller used their balance of $$$$ in their equity line to buy a car or large appliance because they feared they wouldn't have the credit to do so later.  By sending back the unused funds, the balance on the HELOC is reduced and the short sale is more attractive to the lender", says Lidell.  For the tax implications and the balance of her answer to this critically important question, please see the "FAQ" section of our website www.AZAvoidForeclosureNow.com   Contact Gayle Henderson, PC, RE/MAX Excalibur Realty and a Certified Distressed Property Expert (CDPE) 602-8504335, gayle@AZAvoidForeclosureNow.com  for your questions and confidential interview.  We invite your comments or questions on our blog as well, just click on the "add comment"section below.