Denver, CO - This posting is a Reminder about the HB3648, that is still in place through 2012.
Depending on who you are, when someone mentions IRS, it instills fear in most taxpayers. Here is our opinion on the whole forgiveness thing.
Please note that all of the info stated below is my personal opinion on this subject. This is not legal or accounting advice. You should talk to a competent legal or accounting professional before making any decision.
You will have Forgiveness of Debt Tax Liability whether you give the house back to the bank or do a short sale.
It's true! Before I first started doing short sales, I thought that if the bank foreclosed on your house, you wouldn't get a tax hit. However, I did think that you would get a tax hit with a short sale. So why do a short sale if you then have to pay taxes on the bank's loss?
Little did I know that you get hit with the tax liability whether the bank forecloses or you do a short sale.
The government sees it as money you received and never paid taxes on. If you lose a home thru foreclosure, it goes back to the bank and the bank then resells it. However, the amount of supposed debt being supposedly "forgiven" will be much bigger. Why? Because the bank will lose a lot more money. Take the case of a homeowner that CitiMortgage turned down for a short sale. The agent presented them an offer of $385,000, but they rejected it. The bank thought they could get more money after foreclosing on the house and then re-selling it.
However after foreclosing on the house, the bank was only able to re-sell it for $230,000. This left the homeowner's with over $210,000 in debt being forgiven. If the bank had taken their original short sale offer, they would have only had $35,000 in debt forgiven. That's a big difference, right?
Now, here's the good news. The Mortgage Forgiveness Debt Relief Act of 2007, changed all that. Normally, when a lender decides to forgive all or a portion of a borrower's debt and accept less, the forgiven amount is considered as income for the borrower and is liable to be taxed.
However, after the signing of the Mortgage Forgiveness Debt Relief Act, amendments have been made to remove such tax liability and allow the borrower and lender to work freely together to find a common solution that is beneficial to both parties. This protection is limited to primary residences -- rental properties are ineligible for relief -- so consult with a tax advisor. The amount of forgiven mortgage debt allowed to be excluded from income tax is limited to $2 million per year.
Property that was originally acquired as "Income Producing", will not qualify for this tax relief!! So, those that bought an investment property with funds from the lender as an investment property need to get legal counsel to determine their options!
Here is one good thing that comes out of this whole tax thing. It give you lots of ammo to hold off the bank from collecting a deficiency judgment from you. If your bank files a 1099 for the lost income after you do a short sale, then they cannot collect money from you after that. And you can easily get rid of that tax liability by filing a Form 982 with your tax return.
Click here to view the Mortgage Forgiveness Debt Relief Act and Debt Cancellation.
Click here to view the article, Mortgage Workouts, Now Tax-Free for Many Homeowners; Claim Relief on Newly-Revised IRS Form
Thinking about a short sale? I can help you short sale your property so you can move on with your life. Send me an e-mail at
denverforeclosureblog@gmail.com. I will contact you for a
free consultation.
When we talk, I will explain how the process works in detail and answer any questions you may have. Or, if you prefer, you can
call me at 303-521-0984
Discover how other sellers successfully completed a short sale and request a
free consultation by
clicking here.
Thanks for reading this, Dan Hopper.
Dan is a Realtor located in Westminster, CO., specializing in Denver loan modification and short sales:
Phone: 303-521-0984. denverforeclosureblog@gmail.com.
View My homes for sale at www.danhopper.com.
Dan Hopper specializes in loan modification assistance and short sales in Westminster Colorado. Westminster Loan Modification Help, Westminster Short Sales. Westminster Short Sale Realtor. Denver CO Loan Modification Help, Denver CO Short Sales. Denver CO Short Sale Realtor. Westminster CO Short Sales. Westminster Realtor.
For related blogs / video blogs, click on the links, below!!
http://denverloanmodhelp.com/?p=219
http://denverstopforeclosureblog.com/?p=735
http://denverstopforeclosureblog.com/?p=375
View my VIDEO BLOG atwww.youtube.com/user/avoidforeclosures
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Important Notice
Dan Hopper, Remax Alliance, and the Stop Foreclosure Institute are not affiliated in any way, shape, or form with the government. Our services have not been reviewed or endorse by the government or your lender. Most lenders willingly work with agents on short sales. Why?
Because most short sales are beneficial to a lender. If you accept our offer to help you on a short sale, your lender may not agree to a short sale or to modify your loan. We do offer a loan modification kit.
However, the likelihood of negotiating a modification is like everything else in life. It takes work and persistence to convince your lender to modify your loan. No matter what you or we do, your lender may not approve a loan modification.
We do not recommend that you stop paying your mortgage, because this will cause damage to your credit and could cause you to lose your home. Because we know avoiding foreclosure is so important to any homeowner, we recommend that you speak with the appropriate legal or tax advisor before making any decision.
This is not intended as legal, technical, or tax advice. Please speak with a licensed professional before making any decision. Information is deemed reliable but not guaranteed as of the date of writing.
You have the option to reject a short sale or loan modification from your lender if it does not meet your approval. If you decide not to go thru with the short sale, then you do not have to pay us our fee. We normally make a real estate sales commission for helping you on a short sale.
The views expressed here are Dan Hopper's personal views and do not reflect the views of Remax Alliance.
This information on Stop Foreclosure: Reminder, Tax Consequences For A Short Sale? When Will I Have to Move Out?, is provided as a courtesy to our viewers to help them make informed decisions.
