.jpg)
Cancellation of Debt Income - Bankruptcy - and Foreclosure
Donny:
Foreclosure sale is a sale. If the estate sells (is foreclosed upon) it is the estate's tax problem. This is why, if there is a gain on the sale, you must try to trap the sale in the estate.
If the sale results in a low credit bid, or a sold out junior, there can also be a cancellation of debt issue.
Dennis McGoldrick
350 S. Crenshaw Bl., #A207B
Torrance, CA 90503
On Jun 14, 2010, at 10:21 AM, "brandspellman" wrote:
Hello,
For purposes of avoiding COD income on a home being foreclosed upon, does it matter to the IRS if you filed chapter 7 before or after the foreclosure sale date?
To be safe, I've always just assumed its best to file before the sale date. My rationale has been that you want to create the bankruptcy estate before the otherwise taxable event occurs. However, I cannot find anything that backs this assertion.
On second thought, it appears to me that it may not make a difference when the bankruptcy is filed vis-a-vis the sale because it is the discharge on the personal obligation of the debt itself that creates the COD income exclusion.
For instance, Form 982 "Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)" only seems concerned with whether the debt was discharged in a Title 11 proceeding, and does not inquire into when the debt was cancelled, or whether is was before or after the sale.
Any thoughts?
Thanks,
Donny Brand
Brand & Spellman PC
3836 E Anaheim St
Long Beach, CA 90804
Tel: (562) 438-7500
Fax: (562) 438-8500
Donny:Foreclosure sale is a sale. If the estate sells (is foreclosed upon) it is the estate's tax problem. This is why, if there is a gain on the sale, you must try to trap the sale in the estate.If the sale results in a low credit bid, or a sold out junior, there can also be a cancellation of debt issue.Dennis McGoldrick350 S. Crenshaw Bl., #A207BTorrance, CA 90503On Jun 14, 2010, at 10:21 AM, "brandspellman" <brandspellman@yahoo.com> wrote:
Hello,
For purposes of avoiding COD income on a home being foreclosed upon, does it matter to the IRS if you filed chapter 7 before or after the foreclosure sale date?
To be safe, I've always just assumed its best to file before the sale date. My rationale has been that you want to create the bankruptcy estate before the otherwise taxable event occurs. However, I cannot find anything that backs this assertion.
On second thought, it appears to me that it may not make a difference when the bankruptcy is filed vis-a-vis the sale because it is the discharge on the personal obligation of the debt itself that creates the COD income exclusion.
For instance, Form 982 "Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)" only seems concerned with whether the debt was discharged in a Title 11 proceeding, and does not inquire into when the debt was cancelled, or whether is was before or after the sale.
Any thoughts?
Thanks,
Donny Brand
Brand & Spellman PC
3836 E Anaheim St
Long Beach, CA 90804
Tel: (562) 438-7500
Fax: (562) 438-8500
The post was migrated from Yahoo.
Donny:
There is no COD issue on homes under $2 million. It must have been a
personal residence 2 of the last 5 years. It is a temporary law with
some euphemistic name, I forget at the moment. It should be a short
Google away.
Read my blog on the subject if you'd like at
The post was migrated from Yahoo.
Hello,
For purposes of avoiding COD income on a home being foreclosed upon, does it matter to the IRS if you filed chapter 7 before or after the foreclosure sale date?
To be safe, I've always just assumed its best to file before the sale date. My rationale has been that you want to create the bankruptcy estate before the otherwise taxable event occurs. However, I cannot find anything that backs this assertion.
On second thought, it appears to me that it may not make a difference when the bankruptcy is filed vis-a-vis the sale because it is the discharge on the personal obligation of the debt itself that creates the COD income exclusion.
For instance, Form 982 "Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)" only seems concerned with whether the debt was discharged in a Title 11 proceeding, and does not inquire into when the debt was cancelled, or whether is was before or after the sale.
Any thoughts?
Thanks,
Donny Brand
Brand & Spellman PC
3836 E Anaheim St
Long Beach, CA 90804
Tel: (562) 438-7500
Fax: (562) 438-8500
The post was migrated from Yahoo.