Questions and More Questionson Debt Relief
February 21, 2008
The past several weeks, I am receiving questions from sellers and fron agents regarding the tax implications of short sales and foreclosures. In December, the U.S. Congress passed the Mortgage Forgiveness Debt Relief Act of 2007. Like most congressional acts, this one has many details that are crucial to the determination of the tax consequences of both short sales and foreclosures. My best advice to any seller is to consult with a tax accountant or a tax attorney if you are in a short sale or foreclosure situation.
Prior to the passage of the Debt Relief Act, any forgiveness of debt was subject to taxation as ordinary income. The Debt Relief Act provides tax help to homeowners who lose their homes in foreclosure or who sell with a short sale, BUT only if the property was their primary residence AND it is only applicable to acquisition indebtedness.
The IRS is working on the forms that the homeowner will need to complete and these forms are likely to be fairly complex. Hence, it is my belief that seeking professional help or contacting the IRS customer service counselor is absolutely necessary.
(Attending the free consumser workshop at the UCR Extension Campus (see yesterday's blog) may also be helpful. It is primarily focused on preventing foreclosure, which would be a homeowner's best option.
The past several weeks, I am receiving questions from sellers and fron agents regarding the tax implications of short sales and foreclosures. In December, the U.S. Congress passed the Mortgage Forgiveness Debt Relief Act of 2007. Like most congressional acts, this one has many details that are crucial to the determination of the tax consequences of both short sales and foreclosures. My best advice to any seller is to consult with a tax accountant or a tax attorney if you are in a short sale or foreclosure situation.
Prior to the passage of the Debt Relief Act, any forgiveness of debt was subject to taxation as ordinary income. The Debt Relief Act provides tax help to homeowners who lose their homes in foreclosure or who sell with a short sale, BUT only if the property was their primary residence AND it is only applicable to acquisition indebtedness.
The IRS is working on the forms that the homeowner will need to complete and these forms are likely to be fairly complex. Hence, it is my belief that seeking professional help or contacting the IRS customer service counselor is absolutely necessary.
(Attending the free consumser workshop at the UCR Extension Campus (see yesterday's blog) may also be helpful. It is primarily focused on preventing foreclosure, which would be a homeowner's best option.
posted by shirley harry at 10:06 AM
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