what is the advantage of doing a Deed in lieu of foreclosure

tuencanto1 · Joined: 25 Feb 2008 Posts: 1 1.26 Dollars($)

If you do a Deed in lieu of foreclosure do I get a 1099 for the money that I refinance on that property?

sara

Hi Tuencanto,

Welcome to the forums.

You might get the form but that doesn't mean that you'll have to pay tax on any unpaid debt which is canceled by the lender. The form may be given just to keep a written record of the fact that some amount of the debt has been canceled.

However, the situation of cancellation of debt is not common in case of deed-in-lieu because in this case, the lender generally does not ask for the deficiency, if any between the unpaid debt and sale price.

Refer to a previous discussion on Getting 1099-C Form after deed-in-lieu .

Take Care

larry · Joined: 27 Jun 2007 Posts: 3328 473.40 Dollars($)

Hi Tuencanto,

Welcome to the forum.

I agree with Sara. Generally the lenders do not want a deficiency judgment if you go for a DIL. So if your debt is forgiven by the lender then it will be considered as your income and you will be sent a 1099-C form and have to pay tax on it.

Feel free to ask if you have any further questions.

Best of luck,
Larry

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