Did you know-Tax liability for Canceled mortgage debt on a principle residence that is NOT waived? - Short Sale Superstars2024-03-28T13:47:10Zhttp://shortsalesuperstars.com/forum/topics/did-you-know-tax-liability-for-canceled-mortgage-debt-on-a?feed=yes&xn_auth=noI don't even venture into whe…tag:shortsalesuperstars.com,2012-09-08:3468065:Comment:2644212012-09-08T14:46:13.992ZSmittyhttp://shortsalesuperstars.com/profile/Smitty
<p>I don't even venture into whether or not they will owe taxes. My standard line is, "We encourage EVERY SELLER to take their approval letter to their accountant to make sure there are no tax ramifications on the sale of their property." I'm not a CPA and have no idea what will happen post closing, so I don't even try to explain that.</p>
<p>I don't even venture into whether or not they will owe taxes. My standard line is, "We encourage EVERY SELLER to take their approval letter to their accountant to make sure there are no tax ramifications on the sale of their property." I'm not a CPA and have no idea what will happen post closing, so I don't even try to explain that.</p> First, it is principal, not p…tag:shortsalesuperstars.com,2012-09-08:3468065:Comment:2641452012-09-08T03:20:58.794ZTara Nagelhouthttp://shortsalesuperstars.com/profile/TaraNagelhout
<p>First, it is principal, not principle. And yes, we should have all known that or we should not be doing short sales.</p>
<p>First, it is principal, not principle. And yes, we should have all known that or we should not be doing short sales.</p> Yep, they refinanced/pulled m…tag:shortsalesuperstars.com,2012-09-07:3468065:Comment:2643822012-09-07T17:59:16.710ZWayne Brookshttp://shortsalesuperstars.com/profile/WayneBrooks
Yep, they refinanced/pulled money out of the house, did a short sale, but weren't insolvent. How much exactly they were liable for, I don't know.
Yep, they refinanced/pulled money out of the house, did a short sale, but weren't insolvent. How much exactly they were liable for, I don't know. Ok -- got it. We do need to b…tag:shortsalesuperstars.com,2012-09-07:3468065:Comment:2641132012-09-07T17:27:23.641ZEdwin Baloloyhttp://shortsalesuperstars.com/profile/EdwinBaloloy
<p>Ok -- got it. We do need to be careful on the tax / deficency issue.</p>
<p>Have you ever had a situation where a homeowner didn't qualify for either exemption?</p>
<p>I "almost" did. =)</p>
<p>Ok -- got it. We do need to be careful on the tax / deficency issue.</p>
<p>Have you ever had a situation where a homeowner didn't qualify for either exemption?</p>
<p>I "almost" did. =)</p> You're right, insolvency issu…tag:shortsalesuperstars.com,2012-09-07:3468065:Comment:2641952012-09-07T17:22:36.252ZWayne Brookshttp://shortsalesuperstars.com/profile/WayneBrooks
You're right, insolvency issues come into play.<br />
But, the language in my post, regarding mortgages not used for the purchase/improvement of the property, comes directly from the Mortgage Debt Relief Act on the IRS.GOV website.<br />
Just a reminder about what we tell homeowners.
You're right, insolvency issues come into play.<br />
But, the language in my post, regarding mortgages not used for the purchase/improvement of the property, comes directly from the Mortgage Debt Relief Act on the IRS.GOV website.<br />
Just a reminder about what we tell homeowners. From the IRS website:
Is Canc…tag:shortsalesuperstars.com,2012-09-07:3468065:Comment:2641942012-09-07T16:24:07.428ZEdwin Baloloyhttp://shortsalesuperstars.com/profile/EdwinBaloloy
<p>From the IRS website:</p>
<p><em><strong>Is Cancellation of Debt income always taxable?<br></br></strong>Not always. There are some exceptions. The most common situations when cancellation of debt income is not taxable involve:</em></p>
<ul>
<li class="first-child"><em>Qualified principal residence indebtedness: This is the exception created by the Mortgage Debt Relief Act of 2007 and applies to most homeowners.</em></li>
<li><em>Bankruptcy: Debts discharged through bankruptcy are not considered…</em></li>
</ul>
<p>From the IRS website:</p>
<p><em><strong>Is Cancellation of Debt income always taxable?<br/></strong>Not always. There are some exceptions. The most common situations when cancellation of debt income is not taxable involve:</em></p>
<ul>
<li class="first-child"><em>Qualified principal residence indebtedness: This is the exception created by the Mortgage Debt Relief Act of 2007 and applies to most homeowners.</em></li>
<li><em>Bankruptcy: Debts discharged through bankruptcy are not considered taxable income.</em></li>
<li><strong><em>Insolvency: If you are insolvent when the debt is cancelled, some or all of the cancelled debt may not be taxable to you. You are insolvent when your total debts are more than the fair market value of your total assets.</em></strong></li>
<li><em>Certain farm debts: If you incurred the debt directly in operation of a farm, more than half your income from the prior three years was from farming, and the loan was owed to a person or agency regularly engaged in lending, your cancelled debt is generally not considered taxable income.</em></li>
<li class="last-child"><em>Non-recourse loans: A non-recourse loan is a loan for which the lender’s only remedy in case of default is to repossess the property being financed or used as collateral. That is, the lender cannot pursue you personally in case of default. Forgiveness of a non-recourse loan resulting from a foreclosure does not result in cancellation of debt income. However, it may result in other tax consequences.</em></li>
</ul>
<p><a href="http://www.irs.gov/Individuals/The-Mortgage-Forgiveness-Debt-Relief-Act-and-Debt-Cancellation">http://www.irs.gov/Individuals/The-Mortgage-Forgiveness-Debt-Relief-Act-and-Debt-Cancellation</a></p> I never say your 1st statemen…tag:shortsalesuperstars.com,2012-09-07:3468065:Comment:2642822012-09-07T16:20:36.877ZEdwin Baloloyhttp://shortsalesuperstars.com/profile/EdwinBaloloy
<p>I never say your 1st statement. I do encourage them to ask a CPA about IRS section 108.</p>
<p> </p>
<p>In this specific case, I've had clients use insolvency / IRS form 982 and not have to pay taxes. Of course, it will depend on the assets / liabilities of the borrower.</p>
<p> </p>
<p>I never say your 1st statement. I do encourage them to ask a CPA about IRS section 108.</p>
<p> </p>
<p>In this specific case, I've had clients use insolvency / IRS form 982 and not have to pay taxes. Of course, it will depend on the assets / liabilities of the borrower.</p>
<p> </p>