If the short sale is completed and the debt is not paid in full, there is a chance that the unpaid debt amount (if forgiven) could be viewed as income for federal income tax purposes. As for property taxes, such taxes would typically be paid at closing. I would recommend that your aunt speak with either an accountant or tax attorney about her concerns.
This answer is merely for general informational purposes only and does not constitute an attorney/ client relationship. You are strongly advised to consult with an attorney licensed in your home jurisdiction to get detailed advice on your legal matter based on the laws of your home jurisdiction and case facts.
Typically in a short sale or foreclosure situation the seller (owner) can be issued what is called a discharge of indebtedness 1099 - basically a 1099 showing income for the "forgiven" portion of the mortgage debt. Assuming this is a primary residence (and it sounds like it) there have been recent laws mitigating either entirely or in part the effects of this type of income on the recipients 1040 (Mortgage Debt Forgiveness Act which has been extended recently to 2013, see link). Essentially, either the mortgage relief act or a personal situation of insolvency can result in no additional tax from this transaction. My best advice would be for your aunt to seek tax and legal advice and make the best decision possible based on the numbers. ... then use a qualified CPA to prepare her tax returns for 2013 (by April 15, 2014) (assuming this transaction takes place in 2013).
This is not legal advice nor intended to create an attorney-client relationship. The information provided here is informational in nature only. This attorney may not be licensed in the jurisdiction which you have a question about so the answer could be only general in nature. Visit Steve Zelinger's website: http://www.stevenzelinger.com/
You really should have her check with her CPA to get their advice - but generally speaking any forgiveness of debt and a lender is a taxable event - tax being upon the amount of debt forgiven.
My answer does not create an attorney-client relationship and is not to be considered a legal opinion. It is only a general answer to a general question.