Tax ramifications of deed in lieu of foreclosure

Author Message
jollycampr

Guest






PostPosted: Sun May 20, 2007 8:20 pm    Post subject: Tax ramifications of deed in lieu of foreclosure

Hi,

What is the tax ramification (by the IRS the state o CA) for a deed in leiu of foreclosure? Thanks

_________________
Need help choosing the right loan? Get free consultation from community lenders/consultant
Icon Mini Profile adonis
adonis



Joined: 22 Oct 2005



Posts: 3852
Location: ALASKA
120.89 Dollars($)
PostPosted: Sun May 20, 2007 9:33 pm    Post subject: RE:

Welcome Jolly,

Once a deed in lieu foreclosure is accepted, the lender takes over the borrower's property and sells it off to get back the unpaid debt. But if the home sells at a price lower than the unpaid debt, then the deficit is the debt forgiven by the lender. This implies that the borrower need not pay for it and legally the lender cannot claim it. This unpaid debt becomes the basis of the tax that the borrower has to pay on account of the forgiven debt.

Just refer to our section on Deed-in-lieu to know more about the tax ramifications.
brack

Guest






PostPosted: Mon May 21, 2007 11:52 am    Post subject:

IF loan balance is more than property's sale value & lender forgives the difference amount then this forgiven debt becomes taxable income for you (also called cancellation of debt income).

Lender then reports the forgiven debt to IRS and provides the borrower 1099-C form
Ryan

Guest






PostPosted: Tue May 22, 2007 4:03 am    Post subject:

That's right brack. If the taxes on the cancelled debt are not paid on time, the Internal Revenue service (IRS) may place a federal tax lien on your property.
jc

Guest






PostPosted: Tue Jan 22, 2008 9:03 pm    Post subject: property of deceased person

What happens in the case of a deceased person's estate when the property is given up in a Deed in Lieu of foreclosure and there are no funds left in the estate.
Icon Mini Profile adonis
adonis



Joined: 22 Oct 2005



Posts: 3852
Location: ALASKA
120.89 Dollars($)
PostPosted: Wed Jan 23, 2008 12:25 am    Post subject:

The estate of a person includes real property as well as other assets. When you say, there are no funds in the estate, do you mean there are no assets? your question isn't clear, please clarify.
_________________
Procrastination is the enemy of your financial sucess
Icon Mini Profile Caron
Caron
Moderator


Joined: 19 Jul 2005

Posts: 1562
Location: florida
266.56 Dollars($)
PostPosted: Wed Jan 23, 2008 12:40 am    Post subject: RE: tax impact for deed-in-lieu if owner is deceased

Hi Jc,

If a deceased person's estate is given away through a deed-in-lieu, the estate taxes to be paid by the heirs will depend upon the value of the estate minus the home value. The estate value will include assets such as insurance policies, etc.

However, as per the Mortgage Tax Relief Act, one need not pay tax on forgiven debt. Please check out a previous discussion on Tax break for debt forgiveness .

Good luck

_________________
Mortgage Shopping made easy with booklet
Cindy Russell

Guest






PostPosted: Mon Aug 25, 2008 9:53 am    Post subject: Funds left over on Estate foreclosure

What does this mean and is it necessary to obtain legal representation?
Icon Mini Profile larry




Joined: 27 Jun 2007

Posts: 3328

474.49 Dollars($)
PostPosted: Tue Aug 26, 2008 5:01 am    Post subject:

Hi Russell.

Welcome to the forum. The homeowner who have faced the foreclosure, can claim the funds left after the foreclosure and paying off the lenders, taxes and all other fees. The legal representation of an attorney is always appreciable and he can help you to get the surplus money after the foreclosure. Feel free to ask if you have any further questions.

Best of luck,
Larry
Natalie GA LAwyer

Guest






PostPosted: Tue Sep 23, 2008 6:53 am    Post subject: No longer considered taxable debt in some circumstances.

The 1099 income reported to the IRS for a mortgage workout, such as a deed in lieu of foreclosure or a straight foreclosure is now, under certain circumstances for principal residence mortgages, not taxable. Read IRS Form 982 and the mortgage forgiveness debt relief act of 2007 on the Library of Congress website.

PS: >>...IAAL.
tova936

Guest






PostPosted: Mon Mar 02, 2009 4:18 pm    Post subject: Foreclosure with second mortgage involved

Help. I have moved out of a $444K house. I have a second with a private lending co. What is in store for me? I have savings of about $333K. Can they take everything I have? I'm retired and 66 years old.
Icon Mini Profile adonis
adonis



Joined: 22 Oct 2005



Posts: 3852
Location: ALASKA
120.89 Dollars($)
PostPosted: Tue Mar 03, 2009 12:21 am    Post subject:

Hi tova,

As you have walked away from the property, the first lender will have the right to foreclose the property. If the foreclosure sale does not satisfy his loan, he will have the right to sue you for the deficient amount. He can also place a lien on your other property or garnish your savings account.

As far as your second loan is concerned, the second lender may charge off the loan to a collection agency who will collect the dues from you.
tova936

Guest






PostPosted: Tue Mar 03, 2009 8:49 am    Post subject: help

inotice that you live in Alaska. Are the lawa the same in california?
Icon Mini Profile adonis
adonis



Joined: 22 Oct 2005



Posts: 3852
Location: ALASKA
120.89 Dollars($)
PostPosted: Tue Mar 03, 2009 11:29 pm    Post subject:

Welcome back tova,

Laws vary from state to state. I guess, you are from California. As far as I know, in California, the lenders cannot sue the borrowers for the deficient amount resulting from the sale of the property.

_________________
Procrastination is the enemy of your financial sucess
Angel22

Guest






PostPosted: Mon Jun 29, 2009 1:50 am    Post subject: Foreclosure In California

Need some help and advice! We are in jeopardy of a foreclosure!

We have a mortgage and a line of credit. We live in California and know that the first is a non-recourse loan. However, we heard that the line of credit could be a recourse loan. My question is what are the tax ramifications on the line of credit? Can the bank come after us?!!! Please help!
Quick Reply
Your Name
Subject
Message body

All times are GMT - 7 Hours
1 2  Next  
Page 1 of 2

 
Highlights
Helpful References
Mortgage Guide
Mortgage Terms
Mortgage News
Book Center
Shop and Compare lenders
30 Yr. Fixed Vs. 5/1 ARM


Calculators     [View all]
Are you eligible for loan?
How much you can afford?
Calculate monthly payment
Calculate APR


Financial Tools
Credit Repair Tool New
Mortgage Planner
Simple Budgeting Tool


Our Community
MortgageFit Blog
Community Professionals
Community Rewards
Introduce yourself
Website tools


Community Rewards
Five simple ways to earn money with the Mortgage Community.

MortgageFit Live Help

Explore the lender near you

Google Map Image

MF Talk



DebtConsolidationCare    Insurance community: We Make You Insurance Smart    CreditMagic: Helping you build up credit


We have chosen to apply the Creative Commons Attribution License to all works we publish. This work is licensed under cc by 2.0