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Underwater Homeowners, Short Sales, End of Tax Forgiveness In 2013
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2012 Jun 26, 12:24pm 1,974 views 1 comment
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KILLERJANE
2012 Jun 26, 2:43pm
http://homebuying.about.com/od/shortsale/qt/081809-Canceled-debt-short-sales.htm
http://www.azlawhelp.org/articles_info.cfm?mc=3&sc=20&articleid=164
Heloc debt forgiven is taxable.
"If part of the forgiven debt doesn't qualify for exclusion from income under this provision, is it possible that it may qualify for exclusion under a different provision?
Yes. The forgiven debt may qualify under the insolvency exclusion. Normally, you are not required to include forgiven debts in income to the extent that you are insolvent. You are insolvent when your total liabilities exceed your total assets. The forgiven debt may also qualify for exclusion if the debt was discharged in a Title 11 bankruptcy proceeding or if the debt is qualified farm indebtedness or qualified real property business indebtedness. If you believe you qualify for any of these exceptions, see the instructions for Form 982. Publication 4681 discusses each of these exceptions and includes examples."
It is widely known that real estate inventory is down. Lenders have slowed foreclosures in order to accomplish this. My question is to underwater homeowner's... Even if the banks let you squat longer, isn't it in your best interest to short sale before December 31, 2012? After Jan. 1, 2013, isn't the tax forgiveness going to end?
Or has this date been extended? If it hasn't been extended, shouldn't there soon be a spike in homeowner's putting short sales on the market? There are only six months left to close these complicated sales.
I don't fully understand this tax and/or forgiveness. It seems that with a short sale, the tax will be forgiven. Is there a tax incurred if there is a foreclosure? If the foreclosure occurs after Jan. 1, 2013, will the foreclosed upon be stuck owing tax on the bank's loss?
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