Posted on: 26th Jul, 2012 10:27 am
My husband purchaed a townhome with his ex wife while they were married. there were 3 names on the loan, the ex and her daughter and his.
During the divorce he lived in the house. He moved to another city when we were married and his mother occupied the house until he could figure out what to do since that was the time all Hell broke loose. His property value took a dump, I lost my job so we couldnt keep payment up. We moved his mother closer to us and had to stop payments on the townhome.
He went through a year of trying to short sell with 4 offers that were rejected by the bank. They finally forclosed this year and the house sold at auction (20k less than the last short sale offer).
Anyway, question is will there be tax liabilities on the forclosure?
During the divorce he lived in the house. He moved to another city when we were married and his mother occupied the house until he could figure out what to do since that was the time all Hell broke loose. His property value took a dump, I lost my job so we couldnt keep payment up. We moved his mother closer to us and had to stop payments on the townhome.
He went through a year of trying to short sell with 4 offers that were rejected by the bank. They finally forclosed this year and the house sold at auction (20k less than the last short sale offer).
Anyway, question is will there be tax liabilities on the forclosure?
Hi nannasheffey,
If the lender has asked you to pay off the deficient balance in full, then you won't be liable for any taxes. However, if the deficient balance is forgiven by the lender, then it will be considered as your income and you will be liable for paying off the taxes for it. Nevertheless, as the Mortgage Debt Forgiveness Act is still in vogue, you may not have to pay the taxes for the forgiven debt.
Thanks
If the lender has asked you to pay off the deficient balance in full, then you won't be liable for any taxes. However, if the deficient balance is forgiven by the lender, then it will be considered as your income and you will be liable for paying off the taxes for it. Nevertheless, as the Mortgage Debt Forgiveness Act is still in vogue, you may not have to pay the taxes for the forgiven debt.
Thanks
Welcome nannasheffey,
You can contact a tax adviser and he may also be able to let you know what your tax liabilities will be.
You can contact a tax adviser and he may also be able to let you know what your tax liabilities will be.