Posted on: 08th Jun, 2010 12:21 pm
we signed mortgage papers on a timeshare with marriott, in the fall of 2007, when the payments were to begin in the spring of 2008, my husband was ill and out of work, and we could not afford the payments...marriott took it back under a deed in lieu foreclosure. Now we have received a 1099-C for cancellation of debt for over $13,000.00, and a tax bill of $3600.00!! Is there any thing we can do to avoid paying this absurd tax amount..when we have absolutely nothing to show for it. I spoke with marriott, they said it was a legal committment and a contract legal issue, and could not change the cancellation of debt..
Hi cloubopp,
It is true that after a deed in lieu of foreclosure, the lender forgives the deficient balance resulting from the sale of the property. This forgiven amount is considered as your income by the IRS. Thus, you will have to pay taxes on the forgiven debt. As far as my knowledge is concerned, you won't be able to avoid the taxes. You'll have to pay it off.
Thanks
It is true that after a deed in lieu of foreclosure, the lender forgives the deficient balance resulting from the sale of the property. This forgiven amount is considered as your income by the IRS. Thus, you will have to pay taxes on the forgiven debt. As far as my knowledge is concerned, you won't be able to avoid the taxes. You'll have to pay it off.
Thanks