Tax Trap From Foreclosure of Investment Property
I saw an email about income tax liability associated with foreclosure or bankruptcy sent by attorney Larry Heinkel. The email addresses income tax liability from the foreclosure of properties which have previously been depreciated for tax purposes. Most people know that if a bank forgives part of a mortgage loan in the course of a short sale or deed in lieu that the amount of debt forgiveness may be taxable if the mortgaged property is an investment or second home. A new law has eliminated debt forgiveness tax for principal residences. A person who is insolvent at time of short sale or deed in lieu, or who files bankruptcy, has no liability for debt forgiveness taxation. Mr. Heinkel points out a different tax trap.
If the debtor has previously depreciated the property for income tax purposes the tax basis of the property has been lowered from its original purchase price. The short sale or deed in lieu may be treated as a "sale or exchange" which triggers income tax on the difference between the property value and the adjusted basis. This tax liability is not eliminated by insolvency or bankruptcy. People considering walking away from investment property should check with their CPA to see if they may incur tax liability by the recapture of prior tax depreciation.
posted by Jonathan Alper, asset protection and bankruptcy attorney, Orlando, Florida
Florida mother-in-law has car title in her name only, but has house title in both her name and daughter's name. If she serioulsy crashes the car with deaths involved, and she appears to be clearly at fault; is her house asset at risk?
Hello, I would like some clarification on tax consequences of a deed-in-lieu of foreclosure for an Investment Property. The property is under my husband's name only (he bought it before we got married).
1 Are there any tax consequences if he is insolvent?
2 Are there any consequences to me? I'm not on the mortgage. Thank you.
just wanted to ask, so if a house was bought for investment purpose, or i just did not live in the house and it goes to forclosure. will i be responsible for the taxes on the house?
I was wondering, if I forclose on an investment property In Florida, what could potentially happen? I heard that they have 20 years to come after me for the debt. Is this true and if so, is it likely? How would they come after me? Would they want the full amount I owed originally? or would they come after me for the difference that I owed after they sold it again? Or would they ljust tax me on the total amount that I owed on the house?
If you filed bankruptcy and received a discharge and included in the bankruptcy was the mortgage liability for the property/home, and the bank had not foreclosed yet on the property, am I responsible for continuing to pay insurance and/or taxes on the property until it is foreclosed? Or, given that I am discharged from the debt, am I no longer liable?
I filed ch 7 and I received a 1099a from one of the lenders. It was a investment property. They increased the fair market value in order for me to pay taxes. How do you prove that the fair market value is not what the lender stated on the 1099a? Actually the value depreciated and the debt should be cancelled.
Good morning, we have an investment property in Kissimmee that we haven't been able to sell even through a short sale.
As much as I don't want to foreclose, I feel I have no choice as I haven't gotten any help from the bank.
What I would like to know is how bad it damages my credit and if the bank or anyone can do anything against my primary residence.
Thanks and have a great day!
nice post , its informative on tax foreclosures , i accept the importance of tax foreclosure real estate is increasing .
I have investment property in florida that might go into forclosure what impact will if have on my credit. How can I a void forclosure? Are banks helping know that things have got really bad.
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If previously the owner had decreased the value of tax for some purpose the tax may be adjusted to a certain rate with implementing measures by the government with respect to inflation .
If previously the owner had decreased the value of tax for some purpose the tax may be adjusted to a certain rate with implementing measures by the government with respect to inflation .
I have a home in Orlando Fl, i have a real hardship and can't make a payment for the month of February and on, I have a tenant living in the home but the money he pays is not enough to cover the mortgage, I have to pay $1100.00 every month and I just can't do it again, don't even have money to buy food for my kids, what should I do? I LIVE IN LA AND OWN THE HOUSE IN LA, ORLANDO HOME WAS A SECOND HOME.