Posted on: 01st Jul, 2008 05:59 pm
So I understand that the Debt relief act does not cover rental properties however someone told me that I could claim "Insolvency" when I file my taxes which means that if I can prove that my debts exceeded my assets I would maybe be able to have the tax amount forgiven. Anyone know anything about that?
Welcome Lauren.
See usually tax needs to be paid on the forgiven debt. But in the short sale process the due debt is not forgiven. Now if the debt is forgiven and you can prove that you are insolvent then the tax amount will be forgiven. So have you consulted with the mortgage company? What have they said?
See usually tax needs to be paid on the forgiven debt. But in the short sale process the due debt is not forgiven. Now if the debt is forgiven and you can prove that you are insolvent then the tax amount will be forgiven. So have you consulted with the mortgage company? What have they said?
Hello Lauren,
You did not mention exactly if you still have the property, if you are looking for all your options involving keeping or selling the property, so I will go ahead and assume that you have already done a short sale on the property.
You are pretty much correct in your understanding of your issue as it pertains to the Mortgage Forgiveness Debt Relief Act of 2007. Rental properties are not covered under that Act.
If you believe that you may qualify for the "insolvency" exclusion, be sure that your total liabilities exceed your total assets. There are particular instructions for this exclusion within the Form 982 (this is the form used with your tax return - to report the amount of debt forgiven, etc.) so be sure to get all the information available on that form.
I certainly hope that you have the information you need to proceed now. Let us know if you have any other questions.
Good luck.
You did not mention exactly if you still have the property, if you are looking for all your options involving keeping or selling the property, so I will go ahead and assume that you have already done a short sale on the property.
You are pretty much correct in your understanding of your issue as it pertains to the Mortgage Forgiveness Debt Relief Act of 2007. Rental properties are not covered under that Act.
If you believe that you may qualify for the "insolvency" exclusion, be sure that your total liabilities exceed your total assets. There are particular instructions for this exclusion within the Form 982 (this is the form used with your tax return - to report the amount of debt forgiven, etc.) so be sure to get all the information available on that form.
I certainly hope that you have the information you need to proceed now. Let us know if you have any other questions.
Good luck.
