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[ Follow Ups ] [ Post Followup ] [ The Forum Board ] [ FAQ ] Foreclosure tax consequences... Posted by Ward-CA- on January 11, 2004 at 8:45 AM In Reply to: Tax consequences posted by Jeff on January 11, 2004 at 0:37 AM : Ward, : Can you address the various tax consequences(if any)to the sellers of foreclosures and short sales?. For purposes of discussion let's assume that the lender did not recover the full ammount of their loans. Also, if there are negative consequences to the seller do you have a recommended form for disclosure that we as Investors should use? : Thanks, : Jeff ===================== Jeff, Buying and selling foreclosure real estate is the same, taxwise, as buying and selling any other non-foreclosed real property. And so everything you can do with regular real estate to minimize your taxes you can do with real property acquired via foreclosure. If a lender doesn’t receive the full final payoff of a loan secured by real estate they can claim a loss for the unpaid portion and write it off their taxable income, thus lowering their taxes. If a borrower doesn’t pay the lender 100% of the loan they received, then that part not repaid is considered income received and the borrower owes income tax on it, both state and federal. It will come to the taxing authorities attention if the lender sends them and the borrower a 1099 form declaring the amount of forgiveness of debt. The rationale is that the receipt of money that once was a loan but now doesn’t have to be repaid is the equivalent of receipt of income and thus taxable. Hope this helps. Follow Ups: Re: Foreclosure tax consequences... Jeff 4:20 PM, 01/11/04 (0) Post a Followup: Name : E-Mail : Subject : Comments: : : Ward, : : Can you address the various tax consequences(if any)to the sellers of foreclosures and short sales?. For purposes of discussion let's assume that the lender did not recover the full ammount of their loans. Also, if there are negative consequences to the seller do you have a recommended form for disclosure that we as Investors should use? : : Thanks, : : Jeff : ===================== : Jeff, : Buying and selling foreclosure real estate is the same, taxwise, as buying and selling any other non-foreclosed real property. And so everything you can do with regular real estate to minimize your taxes you can do with real property acquired via foreclosure. : If a lender doesn’t receive the full final payoff of a loan secured by real estate they can claim a loss for the unpaid portion and write it off their taxable income, thus lowering their taxes. : If a borrower doesn’t pay the lender 100% of the loan they received, then that part not repaid is considered income received and the borrower owes income tax on it, both state and federal. : It will come to the taxing authorities attention if the lender sends them and the borrower a 1099 form declaring the amount of forgiveness of debt. : The rationale is that the receipt of money that once was a loan but now doesn’t have to be repaid is the equivalent of receipt of income and thus taxable. : : Hope this helps. Optional Link URL: Link Title: Optional Image URL: [ 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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