Posted on: 09th Nov, 2009 05:56 pm
Im working through deed in lieu with my bank. It's not my primary residence so do I have to pay taxes on the difference or is there a way to avoid that? The difference is likely to be $200K and I don't have anywhere near the amount of money to pay the taxes on $200K. I talked to a bankruptcy lawyer and of course they think bankruptcy is the best choice.
Hi barclayrose,
As far as I know, investment properties, second homes, vacation homes or rental units do not qualify for the Mortgage Forgiveness Debt Relief Act. So, if you go for a deed in lieu and if the lender forgives the deficient balance, you'll have to pay the taxes. However, canceled debts for those properties may qualify under insolvency or bankruptcy exclusions.
Thanks
As far as I know, investment properties, second homes, vacation homes or rental units do not qualify for the Mortgage Forgiveness Debt Relief Act. So, if you go for a deed in lieu and if the lender forgives the deficient balance, you'll have to pay the taxes. However, canceled debts for those properties may qualify under insolvency or bankruptcy exclusions.
Thanks
Thanks James,
How to qualify for insolvency is a very confusing subject! Before taking hours of a tax advisors time, which is probably necessary... If I'm forgiven the $200K with deed in lieu, do I need to be insolvent with the rest of my finances to avoid paying the taxes? I am in the positive about $30K (retirement) without factoring in this awful house.
How to qualify for insolvency is a very confusing subject! Before taking hours of a tax advisors time, which is probably necessary... If I'm forgiven the $200K with deed in lieu, do I need to be insolvent with the rest of my finances to avoid paying the taxes? I am in the positive about $30K (retirement) without factoring in this awful house.