Home
Tax Articles
Tax FAQ
Introducing Our Firm
Our Services
Real Estate Taxletter
Need Help?
Other Websites
Site Map

Find us on Facebook
Follow me on Twitter
Connect on LinkedIn
Connect on Google+

Will the Debt Forgiveness Act of 2007 apply to me?

August 25, 2008


From:  David
Date:  20 Feb 2008

I have five houses in Florida purchased in 2006 and two in Arizona that I also bought in 2006. I stopped making payments on all properties two months ago.

I have HELOCs (home equity lines of credit) on four of the houses that total about $200,000 more than they would short sell for.

  1. Will the Debt Forgiveness Act of 2007 apply to me? Am I going to get a bill from the IRS to tax the $200,000 in HELOCs over the short sale or foreclosure price?


  2. If I donít care about my credit, would you advise short sale or foreclosure?


  3. How many months after missing payments will they come and change the locks?

Answer

Date:  19 Mar 2008

Hello David,

  1. Itís the "Mortgage Forgiveness Debt Relief Act of 2007". Since it appears none of these homes are your principal residence, it appears the Act doesnít apply to you. If the lenders cancel the excess debt, you will owe income taxes on the cancellation amount.


  2. Iím not a lawyer or a credit counselor. If you choose foreclosure, the lender has to do most of the work. Tax wise, the consequences are similar.


  3. The answer to this question depends on the real estate laws of the particular state. You might find that lenders are less patient than in the past, because they are trying to protect their own positions in a bad situation. Consult with real estate attorneys in the states where the properties are located.

Good luck!
Mike Gray

We have more answers to frequently asked real estate tax questions! We also offer up-to-date information about new tax real estate tax developments in Michael Gray, CPA's Real Estate Tax Letter.

IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained on this website was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.

Will the Debt Forgiveness Act of 2007 apply to me?

Home | Real Estate Taxletter | Articles | FAQ | Introducing Michael Gray, CPA | Need Help? | Other Links


Michael Gray, CPA
2190 Stokes St., Suite 102
San Jose, California 95128-4512
(408) 918-3162
Fax (408) 998-2766
email: mgray@taxtrimmers.com
© 2016
Subscribe to
Michael Gray, CPA's
Real Estate Tax Letter
!

subscribe
unsubscribe