Posted on: 15th Nov, 2007 01:54 pm
Hi, I was told that if you primary residence short sales, that you may be able to not have to pay the taxes for the difference if you
claim insolvency on your taxes. What exactly is this about?So scared of the tax consequences of the short sale. Thanks.
claim insolvency on your taxes. What exactly is this about?So scared of the tax consequences of the short sale. Thanks.
Hi Marilyn,
If you can prove that you are insolvent, it may be that you need not to pay tax on the difference of the amount but it depends on the circumstances. That means your liabilities exceeds from the fair market value. So it is possible that of your forgiven debt is not taxable or may be only a portion of it is counted as income.
Thanks,
Larry
If you can prove that you are insolvent, it may be that you need not to pay tax on the difference of the amount but it depends on the circumstances. That means your liabilities exceeds from the fair market value. So it is possible that of your forgiven debt is not taxable or may be only a portion of it is counted as income.
Thanks,
Larry
Hello Marilyn,
If your liabilities exceed your assets then you may claim insolvency and your unpaid debt may not be considered taxable. But you have to prove your insolvency to the IRS at the time of filing tax returns.
If the Mortgage Forgiveness Debt Relief Act of 2007 is passed as a law then this tax on forgiven debt will be eliminated for a short sale of primary residence.
If your liabilities exceed your assets then you may claim insolvency and your unpaid debt may not be considered taxable. But you have to prove your insolvency to the IRS at the time of filing tax returns.
If the Mortgage Forgiveness Debt Relief Act of 2007 is passed as a law then this tax on forgiven debt will be eliminated for a short sale of primary residence.
This is to Larry:
"it may be that you need not to pay tax on the difference of the amount but it depends on the circumstances."
what do you mean by amount here?
"So it is possible that of your forgiven debt is not taxable or may be only a portion of it is counted as income."
I don't quite understand what you are trying to say here?
"it may be that you need not to pay tax on the difference of the amount but it depends on the circumstances."
what do you mean by amount here?
"So it is possible that of your forgiven debt is not taxable or may be only a portion of it is counted as income."
I don't quite understand what you are trying to say here?
jenkins, you mean if i prove i'm insolvent, i need not pay taxes on the forgiven debt. But if laws come into being with the declaration that one need not pay tax on forgiven debt, then there's no need to porve insolvency, isn't it?
Hi Terry,
Welcome to this forum.
"
"it may be that you need not to pay tax on the difference of the amount but it depends on the circumstances." "
I wanted to say here if you can prove that you are insolvent then you need not to pay taxes on your forgiven debts. But it depends upon circumstances. Say your forgiven debt is $40,000 and if your total asset amount at that time is $0. So you need not to pay any taxes on $40,000. But if your total asset amount is $12,000, then you have to pay taxes on that $ 12,000 and if your total asset is worth more than $40,000 then you have to pay tax on that total $40,000.
Hope it is clear to you now. Feel free to ask if you have anymore questions.
Thanks,
Larry
Welcome to this forum.
"
"it may be that you need not to pay tax on the difference of the amount but it depends on the circumstances." "
I wanted to say here if you can prove that you are insolvent then you need not to pay taxes on your forgiven debts. But it depends upon circumstances. Say your forgiven debt is $40,000 and if your total asset amount at that time is $0. So you need not to pay any taxes on $40,000. But if your total asset amount is $12,000, then you have to pay taxes on that $ 12,000 and if your total asset is worth more than $40,000 then you have to pay tax on that total $40,000.
Hope it is clear to you now. Feel free to ask if you have anymore questions.
Thanks,
Larry
Hello Gabriel,
Yes, you are correct. If the Mortgage Forgiveness Debt Relief Act passes as a law then there is no need to prove insolvency. The tax that you have to pay on the forgiven debt will be eliminated automatically by this law.
Yes, you are correct. If the Mortgage Forgiveness Debt Relief Act passes as a law then there is no need to prove insolvency. The tax that you have to pay on the forgiven debt will be eliminated automatically by this law.
Has this Act been passed as law?
Hey kokeemon,
This law has been passed in 2007. As far as I know, this law allows you to exclude certain canceled debt on your principal residence from income. Prior to this law, the forgiven debt amount was considered taxable.
This law has been passed in 2007. As far as I know, this law allows you to exclude certain canceled debt on your principal residence from income. Prior to this law, the forgiven debt amount was considered taxable.
this only refers to the IRS forgiving you of the debt, the sate willstill tax you
Hi,
I would like to know what is the tax consequences on a multy family short sale. I used one of the 3 apartments as my primary residence.
I would like to know what is the tax consequences on a multy family short sale. I used one of the 3 apartments as my primary residence.
Hi Aida!
Welcome to forums!
If the lender has forgiven the deficient balance resulting from the short sale, then the forgiven debt will be considered as your income. But depending upon the Mortgage Debt Relief Act, you won't be liable for paying the taxes on the deficient balance.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
If the lender has forgiven the deficient balance resulting from the short sale, then the forgiven debt will be considered as your income. But depending upon the Mortgage Debt Relief Act, you won't be liable for paying the taxes on the deficient balance.
Feel free to ask if you've further queries.
Sussane
Thanks Sussane.I was confused and I went to see an specialist in taxes and the expert told me exactly the same,but also said because this it is a
multi family house I have to pay taxes for depreciation on 2/3 of the house because I'm living there. It's this ok?
multi family house I have to pay taxes for depreciation on 2/3 of the house because I'm living there. It's this ok?
Hi Aida,
Well... as the tax adviser has said so, I think you should go with his/her words. You will be liable for paying taxes for the depreciation of the property.
Thanks
Well... as the tax adviser has said so, I think you should go with his/her words. You will be liable for paying taxes for the depreciation of the property.
Thanks
I did a short sale on a condo that is not my primary residense. I just received two 1099, one from the bank and one from the title company, both totally approximat $151,000. plus i made a promissory note agreement for $10,000 and had to give them $2500 upfront. Now, i received these two 1099. Do I have to pay taxes on these two 1099 and if so how much. Do you know the form that I need to fill out for insolvency. How do I prove insolvency? Please Help me, Thank You
Welcome jo,
If your debt has been forgiven by the lender, then you will be liable for paying taxes on the forgiven debt as it will be considered your income. You can contact a tax adviser and he will help you further in this regard.
If your debt has been forgiven by the lender, then you will be liable for paying taxes on the forgiven debt as it will be considered your income. You can contact a tax adviser and he will help you further in this regard.