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[ Follow Ups ] [ Post Followup ] [ The Forum Board ] [ FAQ ] Tax implications Posted by Ludo on July 17, 2010 at 4:35 PM My wife and I have owned a home in California for 5 years, and a few months ago took advantage of the low pricing in the market to buy a second home nearby. We have been renting out the first home for the last 6 months. However, due to some unforeseen circumstances we are in a position where we cannot afford to continue renting the first home at a loss, and since it is $250,000 underwater we may have to foreclose or short-sale. We have 2 mortgages on the property, both non-recourse as both were used to originally purchase the home. I am concerned about taxes. As far as I can tell, under the Mortgage Debt Relief Act of 2007 the IRS will not collect taxes on a write off because a) the loans are non-recourse and b) it falls under the $2m we can write off due to principal residence indebtedness. Does anyone know if this is correct? Does the home still qualify as a principal residence since we lived in it for 4.5 out of the last 5 years? Are there any other tax consequences? Follow Ups: Post a Followup: Name : E-Mail : Subject : Comments: : My wife and I have owned a home in California for 5 years, and a few months ago took advantage of the low pricing in the market to buy a second home nearby. We have been renting out the first home for the last 6 months. However, due to some unforeseen circumstances we are in a position where we cannot afford to continue renting the first home at a loss, and since it is $250,000 underwater we may have to foreclose or short-sale. We have 2 mortgages on the property, both non-recourse as both were used to originally purchase the home. I am concerned about taxes. As far as I can tell, under the Mortgage Debt Relief Act of 2007 the IRS will not collect taxes on a write off because a) the loans are non-recourse and b) it falls under the $2m we can write off due to principal residence indebtedness. Does anyone know if this is correct? Does the home still qualify as a principal residence since we lived in it for 4.5 out of the last 5 years? Are there any other tax consequences? [ Follow Ups ] [ Post Followup ] [ The Forum Board ] [ FAQ ] WWWAdmin 2.0a © 1997 Matt Wright and DBasics Software Company, All Rights Reserved

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