Foreclosure in 36527>Question Details

Sylvia Stewa…, Real Estate Pro in Fairhope, AL

I am a REALTOR and have sold several short sales in 2009. My clients are now receiving notice from IRS that taxes are due on the amount that the

Asked by Sylvia Stewart, Fairhope, AL Wed Feb 17, 2010

loan "sold short". Treating it as gain! Mortgage company pursuing the client for deficiency. My question: All loans where Fannie Mae backed loans with mortgage insurance...mortgage company has been paid...so why are they still trying to collect from the client/seller?? How can the IRS collect anything from these totally broke people!!! Sylvia Stewart
Keller Williams
Fairhope, Alabama

Help the community by answering this question:

Answers

5
There are separate issues. First Private mortgage insurance may of been paid which is a loss that the mortgage insurer will take. However, the loss could be greater than the percentage insured amount. The insurance can be as low as 10% of total debt, depending on the the deal and risk at the time. When the servicer would file the 1099c they will not take the insurance in consideration only the maket value and pricipal amount.

A 1099c will be given if homeowner vacated the property or it is considered a investment property or vacation home. The accountant will have to determine if there can be an agreement to change 1099C filing.


Keith Manson
First Weber Group
Certified Distressed Property Expert
Metro Milwaukee

http://milwaukeebailout.com
0 votes Thank Flag Link Wed Feb 17, 2010
Sylvia,

My understanding of it is (after reading from the IRS website) it falls under the The Mortgage Forgiveness Debt Relief Act of 2007, which provides relief for debt forgiven in calendar years 2007 through 2012. Properties that qualify are the principal residence if the balance of their loan was $2 million or less; debt used to refinance qualifying debt is also eligible for the exclusion, but only up to the amount of the old mortgage principal, just before the refinancing.

The mortgage companies will likely still send 1099s but the taxpayer needs to complete Form 982 to exclude the debt from their taxable income.

I refer clients to the IRS website and also advise them to contact a CPA.
0 votes Thank Flag Link Wed Feb 17, 2010
Sylvia just because the MI paid some money does not mean that your client does not owe. If someone hits your car and your insurance pays off instead of theirs doesn't your insurer go after the one that caused your problem? Same thing!
Web Reference: http://www.Find1Home.com
0 votes Thank Flag Link Wed Feb 17, 2010
Sylvia,

Take a look at this site and see if it helps. They should also contact a CPA to get better answers.
0 votes Thank Flag Link Wed Feb 17, 2010
Sylvia, The IRS considers the amount forgiven as taxable income. This stinks, but it's the reality of the situation and they will likely have to pay it.
0 votes Thank Flag Link Wed Feb 17, 2010
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2016 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer