Replies to This Discussion

Permalink Reply by Jan Sanderlin on February 23, 2012 at 12:40pm

Ken, Are you licensed as a Tax Attorney or a CPA??? If you are not then you have no business going down that road.  Have your client speak to a CPA and preferably someone that is familiar with his particular tax situation.  It is not this particular transaction that will determine the outcome, rather your client's entire tax situation which you would not have awareness...There are ways to avoid the tax liablity due to a short sale from the IRS, and it varies from State to State per existing legislation.  Paint this picture in very broad strokes for your seller and ALWAYS refer to a licensed professional if you do not hold those credentials...If he asks about an attorney, I would recommend the tax professional first, as the attorney will almost always tell them to floreclose.  And they do this to protect themselves from any possible fall out of a short sale snd rarely consider what is best for their client...I have heard this scenario too many time from people who have gone down that path .Good luck...

Permalink Reply by Thom Colby CA Brkr 888-391-5245 on February 23, 2012 at 12:56pm

Ken -

 

Jan is on-the-mark - They need to chat with a CPA / Tax Advisor / Attorney.

 

There's also a different issue at play - WHY would a seller accept $900K if the Fair Market Value is really $1.6 Million?  If you represent the seller, why would you agree the seller should accept such a low offer?  Are you also representing the Buyer ?

Permalink Reply by Trish Friberg on February 24, 2012 at 4:48am

I agree with Jan.  Ken I always tell my clients to talk to both an attorney and a CPA. 

Permalink Reply by Maria Evans on February 24, 2012 at 8:19am

Ken,

if this is their principal residence they will have no taxe liability. Here is from the IRS:

" ...If you owe a debt to someone else and they cancel or forgive that debt, the canceled amount may be taxable.
The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.
This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.
More information, including detailed examples can be found in Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments."

 

Good Lucky!

Permalink Reply by Ken Ferman on February 27, 2012 at 8:04am

I have no intention of giving my client legal or tax advice; re; Jan~ your response was rude and didn't address my question; please keep your subjective remarks to yourself ; re; Maria thank you for the input

Permalink Reply by Jan Sanderlin on February 27, 2012 at 8:45am

@Ken...You are so very welcome...and who is being rude???

Permalink Reply by Ken Ferman on February 27, 2012 at 8:48am

Jan I was thanking Maria for answering my question; your response was rude! Who are you to give me advice on how to conduct business?  

Ken

Permalink Reply by Jan Sanderlin on February 27, 2012 at 9:03am

Oh, duh...Congratulations, maybe in NY real estate agents are not sued for over stepping their licenses and advising on matters out side of their licensed expertise.  In California, the fall out from advising someone is the potential to lose our licenses and be fined for the priviledge.  The IRS has their tax parameters which isn't the issue; the states are all different as to their deficiency tax forgiveness laws. I was simply trying to save you the grief of giving tax advice when you are not a licensed CPA...If YOU think that is rude...then everyone has a right to their opinion...to each their own...  now I'm done...

Permalink Reply by Thom Colby CA Brkr 888-391-5245 on February 27, 2012 at 9:13am

Harry -

 

Touche'