Home Buying in 02421>Question Details

Pibs, Home Buyer in 03054

How can I prove dissolution of a sole proprietorship to an underwriter?

Asked by Pibs, 03054 Thu Jan 26, 2012

I am currently renting a large horse farm. I no longer wish to teach riding lessons so I am in the process of purchasing a house and will leave the rental property once I can secure a home. I have a full time job outside of the riding lesson business and I am only using the normal job to qualify for the loan. However, my taxes, of course, show a loss from the business for last two years. The underwriter wants proof of dissolution or they will add on my business loss to my salary and I will no longer qualify for the loan. The business was a sole proprietorship. I do not see any tangible way to show dissolution of a sole proprietorship. I sold off my asserts (the horses) and showed bill of sales and finances going into my bank for the sales of these horses. I have no outstanding debts I am carrying forward with me from the business. I did not have any licenses or permits to operate the horse business. What can I do to prove to the bank that I am not going to continue business?

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8
Eric Erickson’s answer
This would be the lender' call. You don't own the business but you took expenses against this part time job. I would think if you can prove the dissolution of your relationship with both property and business without further need of either you should have an argument. If you have an established income for the past two years and no future debts or obligations for this business, then you should be able to leave it behind. I would be happy to speak with you off line.

Best of luck
0 votes Thank Flag Link Tue Apr 3, 2012
Only one way that the under writter will approve, your tax returns showing that it is no longer on your schedule C
0 votes Thank Flag Link Tue Apr 3, 2012
They did accept the schedule C with showing the sales of the assets with proof that the tax return was accepted by IRS. We are all set.
Flag Tue Apr 3, 2012
OP- We were able to quickly file our 2011 taxes and show the sale of my assets (the riding lesson horses). The show an S next to them on the taxes indicating they were sold in that year. This solved the issue. We did, however, lose that house purchase as it was a bank owned property and that would not grant us an extension. Thank you all for the input.
0 votes Thank Flag Link Tue Apr 3, 2012
You should be able to get your accountant to write a note stating that you have disolved the business. That with your new tax return should provide evidence.
0 votes Thank Flag Link Thu Jan 26, 2012
THERE IS ONLY 1 DOCUMENT THAT THE BANK WILL HONOR - YOUR TAX RETURN -

They don't care if your not going to continue the busines as you may have carry forward loses that you show on your return.

Unfortunately I have a deal that has just fallen apart due to the same situation - we are waiting for the 2011 tax return and then it will take 6 weeks for the underwriter to be able to pull the hard copy from the goverment.
0 votes Thank Flag Link Thu Jan 26, 2012
OP- Thank you both for your answers. I will let you know how things turn out.
0 votes Thank Flag Link Thu Jan 26, 2012
I highly suggest that you retain a local attorney to assist you. He will be able to prepare a document that should satisfy the underwriter.
0 votes Thank Flag Link Thu Jan 26, 2012
ASk your mortgage officer If a letter that is notarized will suffice
0 votes Thank Flag Link Thu Jan 26, 2012
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