Can anyone tell me if this is true?
- Jeemie
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Can anyone tell me if this is true?
Utter crap if it is!
Apparently, if you had your home foreclosed on last year, and it was sold at a sherrif's sale, you WILL get a 1099 for the difference between the sale price and what you had remaining on your mortgage.
If it sold for more than you owe, it WILL be considered income, and you will be taxed.
So when you're down and out, the IRS is gonna come knocking?
That's crap!
I'm guessing this law came about because usually homes go for a song at fire sales, and so the amount you owe is usually greater than what it sells for?
Apparently, if you had your home foreclosed on last year, and it was sold at a sherrif's sale, you WILL get a 1099 for the difference between the sale price and what you had remaining on your mortgage.
If it sold for more than you owe, it WILL be considered income, and you will be taxed.
So when you're down and out, the IRS is gonna come knocking?
That's crap!
I'm guessing this law came about because usually homes go for a song at fire sales, and so the amount you owe is usually greater than what it sells for?
1979 City of Champions 2009
- PlacentiaSoccerMom
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I have never had a foreclosed house, but I have read that you will get a 1099 for the amount of the difference between what you owe and what the house sells for if the bank forgives the loan.
Congress is trying to pass a law so that people will not get 1099's, but if I recall correctly, the law will only apply to people who have been priced out of their homes due to increasing interest rates.
Congress is trying to pass a law so that people will not get 1099's, but if I recall correctly, the law will only apply to people who have been priced out of their homes due to increasing interest rates.
- Bob Juch
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Re: Can anyone tell me if this is true?
The Board has several tax experts; I am not one of them. However, I believe it's if the house sells for LESS than you owe that you'd get the 1099. If it sells for more than you owe, you don't get the difference so that's not income to you.Jeemie wrote:Utter crap if it is!
Apparently, if you had your home foreclosed on last year, and it was sold at a sherrif's sale, you WILL get a 1099 for the difference between the sale price and what you had remaining on your mortgage.
If it sold for more than you owe, it WILL be considered income, and you will be taxed.
So when you're down and out, the IRS is gonna come knocking?
That's crap!
I'm guessing this law came about because usually homes go for a song at fire sales, and so the amount you owe is usually greater than what it sells for?
Actually any bad debt that you owe is supposed to be reported as your income.
I may not have gone where I intended to go, but I think I have ended up where I needed to be.
- Douglas Adams (1952 - 2001)
Si fractum non sit, noli id reficere.
Teach a child to be polite and courteous in the home and, when he grows up, he'll never be able to drive in New Jersey.
- Douglas Adams (1952 - 2001)
Si fractum non sit, noli id reficere.
Teach a child to be polite and courteous in the home and, when he grows up, he'll never be able to drive in New Jersey.
- wintergreen48
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Re: Can anyone tell me if this is true?
That doesn't make sense. A 1099 is supposed to reflect 'profit' or 'gain' that a taxpayer receives. If a house sells for more than the debt amount, the difference is not profit/gain, unless the customer's basis (the original cost of the house plus qualifying improvements) is exactly equal to the amount of the debt.Jeemie wrote:Utter crap if it is!
Apparently, if you had your home foreclosed on last year, and it was sold at a sherrif's sale, you WILL get a 1099 for the difference between the sale price and what you had remaining on your mortgage.
If it sold for more than you owe, it WILL be considered income, and you will be taxed.
So when you're down and out, the IRS is gonna come knocking?
That's crap!
I'm guessing this law came about because usually homes go for a song at fire sales, and so the amount you owe is usually greater than what it sells for?
In most cases (unless the taxpayer has owned the house for a long time and has refinanced it), even if the amount of the sale exceeds the debt owed, it will probably be LESS than the taxpayer's basis in the house, in which case the taxpayer probably still has a loss, rather than a gain. By way of example, if the taxpayer buys a house for $200,000, and makes no qualifying improvements, her/his taxable basis will be $200,000 (disregard piddly costs involved with the original purchase that may go into the basis). Suppose he/she has an original mortgage amount of $180,000, the current debt is $170,000, and the house is now valued at $210,000. Say the house sells for $190,000, which is more than the original mortgage, and more than the debt owed-- that is still less than the taxpayer's $200,000 basis, so the taxpayer actually has a loss, not a gain, and there is no way that he/should would have any tax liability for that.
As a practical matter, no house in foreclosure is going to sell for more than the total debt (first and second and other mortgages)-- if there were a market for that, the owner would have sold it before it got to the foreclosure. People do not go to foreclosure sales with the intention of paying more than the property is worth, and if there were enough equity in the property to justify a higher price, the owner would already have sold it or refinanced it with SOMEONE. The highest price that it is likely to bring is the actual amount of the debt, and that assumes that the bank bids it up to that level. The most likely scenario is that the property will sell for less than the amount of the debt, and if the bank gives the borrower an absolute release from the remaining balance owed, then that remaining balance is a taxable 'gain,' since the the borrower is getting what amounts to free money from the lender.
- tlynn78
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If the sale is for more than you owe in Montana, you get the difference, and a 1099 for the amount of the difference.
t.
t.
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- themanintheseersuckersuit
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If the house was mortgaged for more that was paid for it (more than the tax basis) there could be income on the sale, except that if the house qualified as the primary residence the first $250,000 in gain would be excluded.
Suitguy is not bitter.
feels he represents the many educated and rational onlookers who believe that the hysterical denouncement of lay scepticism is both unwarranted and counter-productive
The problem, then, is that such calls do not address an opposition audience so much as they signal virtue. They talk past those who need convincing. They ignore actual facts and counterargument. And they are irreparably smug.
feels he represents the many educated and rational onlookers who believe that the hysterical denouncement of lay scepticism is both unwarranted and counter-productive
The problem, then, is that such calls do not address an opposition audience so much as they signal virtue. They talk past those who need convincing. They ignore actual facts and counterargument. And they are irreparably smug.
- eyégor
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Re: Can anyone tell me if this is true?
wintergreen48 wrote:
As a practical matter, no house in foreclosure is going to sell for more than the total debt (first and second and other mortgages)-- if there were a market for that, the owner would have sold it before it got to the foreclosure. People do not go to foreclosure sales with the intention of paying more than the property is worth, and if there were enough equity in the property to justify a higher price, the owner would already have sold it or refinanced it with SOMEONE. The highest price that it is likely to bring is the actual amount of the debt, and that assumes that the bank bids it up to that level. The most likely scenario is that the property will sell for less than the amount of the debt, and if the bank gives the borrower an absolute release from the remaining balance owed, then that remaining balance is a taxable 'gain,' since the the borrower is getting what amounts to free money from the lender.
While the premise that no house will sell for less than the total debt makes sense, all too many people find themselves in a situation just like that and aren't thinking clearly enough to get out. It is often easier to ignore it until it is too late. Denial isn't just a river in Egypt.
- Jeemie
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Re: Can anyone tell me if this is true?
Yes- I realized I got that backwards later.Bob Juch wrote:The Board has several tax experts; I am not one of them. However, I believe it's if the house sells for LESS than you owe that you'd get the 1099. If it sells for more than you owe, you don't get the difference so that's not income to you.Jeemie wrote:Utter crap if it is!
Apparently, if you had your home foreclosed on last year, and it was sold at a sherrif's sale, you WILL get a 1099 for the difference between the sale price and what you had remaining on your mortgage.
If it sold for more than you owe, it WILL be considered income, and you will be taxed.
So when you're down and out, the IRS is gonna come knocking?
That's crap!
I'm guessing this law came about because usually homes go for a song at fire sales, and so the amount you owe is usually greater than what it sells for?
Actually any bad debt that you owe is supposed to be reported as your income.
And I understand a released from the mortgage company is like getting free money from the lender, most people, I believe, are honorable and didn't intentionally get into trouble with their loans.
To tax them for it when they've already lost their house and had their credit rating screwed up just seems excessive to me.
1979 City of Champions 2009
- MarleysGh0st
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Re: Can anyone tell me if this is true?
But it would be consistent with your signature line.Jeemie wrote: To tax them for it when they've already lost their house and had their credit rating screwed up just seems excessive to me.
"Capitalism without losses is like religion without hell"
- gotribego26
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Re: Can anyone tell me if this is true?
There are actually two separate issues involved in a foreclosure sale as far as the IRS is concerned. One is whether there is a gain or loss on sale of the asset, whether that gain or loss flows through to taxable income. In almost all cases losses do not flow through and are not deductible. Gains on a residence are generally not taxed unless they exceed $500,000 for a joint return or $250,000 for a single return.Jeemie wrote:Yes- I realized I got that backwards later.Bob Juch wrote:The Board has several tax experts; I am not one of them. However, I believe it's if the house sells for LESS than you owe that you'd get the 1099. If it sells for more than you owe, you don't get the difference so that's not income to you.Jeemie wrote:Utter crap if it is!
Apparently, if you had your home foreclosed on last year, and it was sold at a sherrif's sale, you WILL get a 1099 for the difference between the sale price and what you had remaining on your mortgage.
If it sold for more than you owe, it WILL be considered income, and you will be taxed.
So when you're down and out, the IRS is gonna come knocking?
That's crap!
I'm guessing this law came about because usually homes go for a song at fire sales, and so the amount you owe is usually greater than what it sells for?
Actually any bad debt that you owe is supposed to be reported as your income.
And I understand a released from the mortgage company is like getting free money from the lender, most people, I believe, are honorable and didn't intentionally get into trouble with their loans.
To tax them for it when they've already lost their house and had their credit rating screwed up just seems excessive to me.
The other issue is the forgiveness or cancellation of debt. This often creates a taxable event.
I could attmept to explain some scenarios here - but the IRS has already done it - see the section starting on page 5 of IRS publication 544.
http://www.irs.gov/pub/irs-pdf/p544.pdf
Note also that there is an exemption from income for debt that is "Qualified Principal Residence Indebtedness" - which would help most people out of the issue with income from forgiveness of a loan.
More details are here in publication 982:
http://www.irs.gov/pub/irs-pdf/f982.pdf
- Jeemie
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Re: Can anyone tell me if this is true?
My sig line has nothing about taxes.MarleysGh0st wrote:But it would be consistent with your signature line.Jeemie wrote: To tax them for it when they've already lost their house and had their credit rating screwed up just seems excessive to me.
"Capitalism without losses is like religion without hell"
1979 City of Champions 2009