Depending on the seller and definitions for a prohibited transaction. Same in a modification and of course your basis in the property. If your upside down and the seller establishes a price upon trustee sale below your basis - then how?
If the seller (Lender) receives the insured proceeds from the overcollateralization for any short fall NO WAY!
(See CPA) Same with a modifcation - Under section I of the code subject to modifcations the IRS revenue procedure it describes the conditions under which modifications to certain subprime mortgage loans will not cause the Internal Revenue Service (Service) to challenge the tax status of certain securitization vehicles that hold the loans or to assert that those modifications create a liability for tax on a prohibited transaction.
The purpose of the revenue procedure is to provide certainty in the current economic environment with respect to certain potential tax issues that may be implicated by fast track loan modifications, as described below. No inference should be drawn about whether similar consequences would obtain if a transaction falls outside the limited scope of this revenue procedure. Furthermore, there should be no inference that, in the absence of this revenue procedure, transactions within its scope would have impaired the tax status of securitization vehicles or would have created liability for tax on a prohibited transaction.
Rev. Proc. 2007-72, 2007-52 I.R.B. 1257, provided similar guidance regarding fast-track loan modifications that were effected in a manner consistent with certain principles, recommendations, and guidelines (the â€œOriginal Frameworkâ€), which the American Securitization Forum (â€œASFâ€) released on December 6, 2007. In July 2008, the ASF released an updated Framework, which covers additional fast-track loan modifications.
This revenue procedure amplifies and supersedes Rev. Proc. 2007-72 by extending its provisions to these additional loan modifications.