Debt Forgiveness Can Be Taxed?
This may be a simple question but this doesn’t make any sense to me. So if I SS someone’s home and they are by law required to claim that debt forgiveness as taxable income. Does this mean that the money I make off the deal which is technically the same money their being forgiven on also taxable.
For example;
Family has a house worth 200,000, and they owe this amount.
I SS the house for 120,000 and make 80,000 (again as an example)
The family has to claim the 80,000 as taxable income, and I have to claim this same 80,000 since it’s in my pocket also???
What am I missing here? Isn’t that double taxation?
They are getting $80K forgiven and so it counts as income for them.
You buy the property for $120K and sell it for $200K so you make $80K which is income for you and you pay the tax on that.
ok now I see, the profit a SS makes upon a sale would be considered a different transaction and taxable by itself. I think I go it. thank you
Thats wrong.
Hes talking about the bank giving a 1099 for the loss (being the 80k). Yes that is true, yes they can do that. Do they do it all the time? NO. if it happens the homeowner they can file a FORM 982 to discharge any of that debt. They will then not be responsible for paying the tax on the difference.
-Ryan[ Edited by ryand on Date 08/19/2007 ]
Ryan so the ex-homeowner who had their debt shorted just has to fill out the 982 form and they are no longer held liable for the debt? If so do you suggest making this a form that you hand to them to fill out in the event of the SS?
How did this work out for you?
I understand the concept however I do have a question? I have yet to do a SS so bare with me. If you suggest that offers should be reevaluated and possibly adjusted how do you defend this to the miti dept? Should I think about sending in the rate increases in my state and a letter stating the same argument you just used. Would that help my cause or be pushed aside? Any help would be great.
Rentals are moving fast right now. We have a property for sale and have received about 10 times as many renters interested as buyers.
Right now even folks with good credit (680-720) are feeling the crunch. If you have the funds to buy and hold then go for it.
Plus, I see houses that are selling fast. Of course most of those are being bought by investors as almost all of them need work.
Comps still matter. Not all areas are overinflated. In a lot of small towns and such you will find the market pretty steady still