Parts Catalog Accessories Catalog How To Articles Tech Forums
Call Pelican Parts at 888-280-7799
Shopping Cart Cart | Project List | Order Status | Help



Go Back   PeachParts Mercedes-Benz Forum > General Discussions > Off-Topic Discussion

Reply
 
LinkBack Thread Tools Display Modes
  #1  
Old 08-24-2009, 09:28 AM
tyl604's Avatar
Registered User
 
Join Date: Feb 2008
Location: Atlanta, GA
Posts: 3,640
Is there income tax on short sales?

Been hearing lately about short sales. A distressed homeowner makes a deal to sell his house for a really low (but market) price which is less than the loan. He gets the mortgage company to accept a full payoff of the loan at a big discount. The example used was a $100,000 mortgage which was paid off in full for $15,000 from proceeds of the sale. According to the talking heads, everyone is happy.

Question - what about income tax implications? If you pay off a credit card account at a discount, they report it to the IRS and you must report that discount as income and pay taxes on it. So what's the deal with short sales. Is it different with short sales or are they just telling part of the story?

Anyone know?

Reply With Quote
  #2  
Old 08-24-2009, 09:33 AM
Medmech's Avatar
Gone Waterboarding
 
Join Date: Feb 2007
Posts: 117
The Mortgage Forgiveness Debt Relief Act of 2007 says that for foreclosures, short sales and mortgage restructurings for less than the current balance on the mortgage, there will be no tax on the forgiven debt, if...
  • The debt relief was incurred between 2007 and 2009
  • The debt was for purchase and improvement of the house
  • The debt was secured by the borrower's primary residence
  • The amount forgiven was no more than $2 Million for a married couple
Reply With Quote
  #3  
Old 08-24-2009, 10:58 PM
tyl604's Avatar
Registered User
 
Join Date: Feb 2008
Location: Atlanta, GA
Posts: 3,640
Thanks Medmech. That's one I missed.
Reply With Quote
  #4  
Old 08-25-2009, 09:34 AM
dynalow's Avatar
Registered User
 
Join Date: Feb 2002
Posts: 1,599
Quote:
Originally Posted by Medmech View Post
The Mortgage Forgiveness Debt Relief Act of 2007 says that for foreclosures, short sales and mortgage restructurings for less than the current balance on the mortgage, there will be no tax on the forgiven debt, if...
  • The debt relief was incurred between 2007 and 2009
  • The debt was for purchase and improvement of the house
  • The debt was secured by the borrower's primary residence
  • The amount forgiven was no more than $2 Million for a married couple
Med's explanation above is correct. You should particularly note that these rules apply to "Qualified Principal Residence Indebtedness." This would not include any refinancings for equity cashouts for any other purpose.

See IRS pub 4681 page 7 for an example of this.
http://www.irs.gov/pub/irs-pdf/p4681.pdf
Reply With Quote
  #5  
Old 08-25-2009, 10:56 AM
Dee8go's Avatar
Senor User
 
Join Date: Apr 2006
Location: The People's Republic of Arlington, VA
Posts: 7,193
A debt forgiven is like income, no?
__________________
" We have nothing to fear but the main stream media itself . . . ."- Adapted from Franklin D Roosevelt for the 21st century

OBK #55

1998 Lincoln Continental - Sold
Max 1984 300TD 285,000 miles - Sold
The Dee8gonator 1987 560SEC 196,000 miles - Sold
Orgasmatron - 2006 CLS500 90,000 miles
2002 C320 Wagon 122,000 miles
2016 AMG GTS 12,000 miles
Reply With Quote
  #6  
Old 08-25-2009, 11:16 AM
dynalow's Avatar
Registered User
 
Join Date: Feb 2002
Posts: 1,599
Quote:
Originally Posted by Dee8go View Post
A debt forgiven is like income, no?
You looking for the Cliff notes Tom?
Outside of bankruptcy or insolvency, generally, the answer is yes.
Negotiated credit card settlements are an example of this. Taxable income to the debtor.
Reply With Quote
  #7  
Old 08-25-2009, 11:33 AM
Dee8go's Avatar
Senor User
 
Join Date: Apr 2006
Location: The People's Republic of Arlington, VA
Posts: 7,193
Quote:
Originally Posted by dynalow View Post
You looking for the Cliff notes Tom?
Outside of bankruptcy or insolvency, generally, the answer is yes.
Negotiated credit card settlements are an example of this. Taxable income to the debtor.
Not Cliff Notes. I was just consulting my common sense.
__________________
" We have nothing to fear but the main stream media itself . . . ."- Adapted from Franklin D Roosevelt for the 21st century

OBK #55

1998 Lincoln Continental - Sold
Max 1984 300TD 285,000 miles - Sold
The Dee8gonator 1987 560SEC 196,000 miles - Sold
Orgasmatron - 2006 CLS500 90,000 miles
2002 C320 Wagon 122,000 miles
2016 AMG GTS 12,000 miles
Reply With Quote
  #8  
Old 08-25-2009, 12:10 PM
dynalow's Avatar
Registered User
 
Join Date: Feb 2002
Posts: 1,599
Quote:
Originally Posted by Dee8go View Post
Not Cliff Notes. I was just consulting my common sense.
Although they are in sync on this point, I wish the guys and gals who write the tax laws in Congress had your common sense. I'd have fewer gray hairs.

Reply With Quote
Reply

Bookmarks

Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is On
Trackbacks are On
Pingbacks are On
Refbacks are On




All times are GMT -4. The time now is 08:46 PM.


Powered by vBulletin® Version 3.8.7
Copyright ©2000 - 2024, vBulletin Solutions, Inc.
Search Engine Optimization by vBSEO 3.6.0
Copyright 2024 Pelican Parts, LLC - Posts may be archived for display on the Peach Parts or Pelican Parts Website -    DMCA Registered Agent Contact Page