Deed in Lieu Process...I am liable for repayment?

michelle · Posted: Tue Jan 29, 2008 4:05 pm Post subject:

Diane,

Here is some information I copied from the government website. Below the information is a link to the site should you wish to read through it. On Dec 21, 2007 the Mortgage Debt Foregiveness Act was signed. It applies to situations that occured after January 1, 2007 (which I assume yours did since you have a current 1099.)

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12/20/2007--Public Law.
(This measure has not been amended since it was passed by the Senate on December 14, 2007. The summary of that version is repeated here.)
Mortgage Forgiveness Debt Relief Act of 2007 - Amends the Internal Revenue Code to exclude from gross income amounts attributable to a discharge, prior to January 1, 2010, of indebtedness incurred to acquire a principal residence. Limits to $2 million the excludable amount of such indebtedness. Reduces the basis of a principal residence by the amount of discharged indebtedness excluded from gross income. Disallows an exclusion for a discharge of indebtedness on account of services performed for the lender or any other factor not directly related to a decline in the value of the residence or to the financial condition of the taxpayer. Sets forth rules for determining the allowable amount of the exclusion for taxpayers with nonqualifying indebtedness and taxpayers who are insolvent

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The link is:

http://www.govtrack.us/congress/bill.xpd?bill=h110-3648&tab=summary

Please let us know if you have any other questions.

Guest 0.10 Dollars($)

I read some more about this bill. It stated that this bill was created to help families who would refinance their mortgage and pay no taxes on any debt forgiveness. In my case, we had moved into another house and rented the house we lost on land contract. When those people failed to pay, we had no choice but to give the deed to the lender. We did not refinance the house we lost. Will this relief act still apply to me? Help!

michelle · Posted: Tue Jan 29, 2008 6:29 pm Post subject:

Diane - here's some verbiage from the actual bill itself. I do not see a reference that the debt had to result in refinance. It does however specify that it needs to be your primary residence. It sounds like this was not your residence at the time of the surrender so you more than likely will not be eligible for the protection on the entire amount - see section 4. It does appear that you might be eligible for partial foregiveness. I would advise you to speak to a tax professional and get their opinion. You might still have some recourse if you can prove that you are insolvent (meaning you can't pay)

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as found on site http://www.govtrack.us/congress/billtext.xpd?bill=h110-3648

Guest 0.10 Dollars($)

i rented a home and had to pay remax a 1,400 brokers fee 1st and last months rent. is this fee tax deductable. thank you

Caron · Posted: Thu Jan 31, 2008 1:20 am Post subject: RE: taxes on mortgage forgiveness

Hi Diane,

You need not pay the deficiency in a deed-in-lieu and under the current laws, you will not be taxes by the IRS for not paying the deficiency. I hope I could clear the confusion.

Feel free to discuss further

good luck

Guest 0.10 Dollars($)

Diane,
Debt Forgiveness Relief Act does exclude you from paying taxes on a foreclosed mortage, but you do have to report it on IRS form 982. You should go to a CPA and have your taxes done to make sure it is done correct.

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

Hi Jesse,

Welcome to the forum.

Good info. Seems you have sound knowledge regarding law. Why don't you join this community and share your knowledge and help people who are in need of your knowledge. It will be great if you join this community and I hope hundreds of people will be beneficial with your sound suggestions and valuable information Smile

You also introduce yourself at http://www.mortgagefit.com/introduce-yourself.html
and let others know about you.

Best of luck,
Larry

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