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Foreclosure and IncomeTax Liability.

by Andrew
(Pittsburgh, PA)

I would like to share with everybody very interested article about foreclosure consequences. Foreclosure and Income Tax Liability.
When comes to foreclosure consequences this is, I think very painful one. It will be helpful to read this.
"Homeowners in foreclosure might face an income tax liability"

...When he could no longer make payments on his home in Allentown Pennsylvania, and the lender, Wells Fargo, foreclosed on his $106,000 mortgage in 2005, William Stout thought he could make a fresh start, according to a report in The New York Times. But in July, Stout and his new wife received a bill from the Internal Revenue Service for $34,603 in taxes, penalties and late fees on income resulting from Cancellation of Debt (COD).
Wells Fargo was unable to sell the home at auction at the time and purchased the home for $1.
Wells Fargo reported the cancellation of debt to the IRS as required. The IRS billed Mr. Stout for failure to pay taxes on COD income. ... to read more copy link below and paste to your browser.

http://www.accountingweb.com/
cgi-bin/item.cgi?id=103937&d=883&h=884&f
=882&dateformat=%25e-%25h-%25y



Comments and Rating for
Foreclosure and IncomeTax Liability.

Oct 09, 2007
 1099 with Deed In Lieu of Foreclosure
by: Kris

1099 with Deed In Lieu of foreclosure is an IRS form showing a capital gain on the property.
".... If someone lends you $200,000 and then later forgives the debt, you've made money. The income tax laws treat the forgiven debt as taxable income. ..."

You can read more about this in our "Foreclosure News" section under "Let's Give the IRS a Break"

Good news for homeowners facing foreclosure.
The House of Representatives has passed a bill that would provide relief to homeowners facing the threat of taxes on their foreclosed homes.
The bill passed would allow taxpayers to avoid taxes on the forgiven portion of their mortgage debts.
The Internal Revenue Service has considered the forgiven debt to be taxable.

"President Bush issued a statement praising the bill but urged the Senate to consider it as a temporary measure"
"The measure is expected to reduce government tax receipts by $650 million, but would be offset by provisions that tighten requirements to get tax breaks for the sale of a second home used as a vacation home or rental property"





Sep 07, 2007
 Taxes and 1099
by: Gary

I was under the impression that if a person loses their home in forclosure, the bank issues a 1099 at the end of the year. When the former homeowner completes their income tax they state "surrender of an asset" that they no longer own. No taxes would be the result. Am I wrong?



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