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Tax Liability
Insolvency is irrelevant, the debt was discharged in bk. Are you sure it's not a capital gain issue? Just because the property was sold for less than the debt owed does not mean there is a loss. What matters is sale price after costs of sale minus the basis (i.e. How much the debtor paid for the property plus any capital improvements. Tax attributes then reduce that amount by the amount of the discharged debt not paid back to the lender(s))
If the debtor used the house as a piggy bank over time and/or had a large amount of unsecured debt discharged, there could easily be a taxable gain, even after a short sale.
Mark Jessee
Sent from my iPhone
> On Mar 9, 2016, at 11:40 AM, tuanl@stevelopezlaw.com [cdcbaa] wrote:
>
> Dear List,
>
> I have a previous client who received a Ch 7 discharge. They stated that the IRS is now going after them for taxes on their principal residence that was short sold (about $200k less) about a year after the closing of the case. My question is since personal liability of the secured lienholder was discharged, does the discharge cut off the client's right to claim insolvency on the deficiency income for the tax year the property was sold? That is the only reasoning I can think the IRS has as their basis for all of this.
>
> Thanks,
> Tuan Le
>
>
>
>
The post was migrated from Yahoo.
Pull transcripts and confirm whether tax liability resulted from no IRC 108 exception to the forgiven debt or capital gains. Balance sheet insolvency test under IRC 108 is transaction date based.
Sent from my iPhone - please excuse typos.
> On Mar 9, 2016, at 11:40 AM, tuanl@stevelopezlaw.com [cdcbaa] wrote:
>
> Dear List,
>
> I have a previous client who received a Ch 7 discharge. They stated that the IRS is now going after them for taxes on their principal residence that was short sold (about $200k less) about a year after the closing of the case. My question is since personal liability of the secured lienholder was discharged, does the discharge cut off the client's right to claim insolvency on the deficiency income for the tax year the property was sold? That is the only reasoning I can think the IRS has as their basis for all of this.
>
> Thanks,
> Tuan Le
>
>
>
>
The post was migrated from Yahoo.
Reply-To: Craig J Beauchamp
X-Original-Return-Path: Craig J Beauchamp
To: cdcbaa@yahoogroups.com
X-Yahoo-Newman-Id: groups-system
Did they fall out IRS Firm 982 re insolvency. Not sure if in effect but
was used during depression exactly for this reason, avoid taxes on any
loans forgiven or short sale. UNLESS their assets are greater than
liabilities, ie IRAs , etc. I always recommend folks talk to tax pro
before a short sale because of the potential tax consequences.
On Mar 9, 2016 11:40 AM, "tuanl@stevelopezlaw.com [cdcbaa]" wrote:
>
>
> Dear List,
>
> I have a previous client who received a Ch 7 discharge. They stated that
> the IRS is now going after them for taxes on their principal residence that
> was short sold (about $200k less) about a year after the closing of the
> case. My question is since personal liability of the secured lienholder
> was discharged, does the discharge cut off the client's right to claim
> insolvency on the deficiency income for the tax year the property was
> sold? That is the only reasoning I can think the IRS has as their basis
> for all of this.
>
> Thanks,
> Tuan Le
>
>
>
>
Did they fall out IRS Firm 982 re insolvency. Not sure if in effect but was used during depression exactly for this reason, avoid taxes on any loans forgiven or short sale. UNLESS their assets are greater than liabilities, ie IRAs , etc. I always recommend folks talk to tax pro before a short sale because of the potential tax consequences.
On Mar 9, 2016 11:40 AM, "tuanl@stevelopezlaw.com [cdcbaa]" <cdcbaa@yahoogroups.com> wrote:
Dear List,I have a previous client who received a Ch 7 discharge. They stated that the IRS is now going after them for taxes on their principal residence that was short sold (about $200k less) about a year after the closing of the case. My question is since personal liability of the secured lienholder was discharged, does the discharge cut off the client's right to claim insolvency on the deficiency income for the tax year the property was sold? That is the only reasoning I can think the IRS has as their basis for all of this.Thanks,Tuan Le
The post was migrated from Yahoo.
X-Original-Return-Path: Craig J Beauchamp
To: cdcbaa@yahoogroups.com
X-Yahoo-Newman-Id: groups-system
Did they fall out IRS Firm 982 re insolvency. Not sure if in effect but
was used during depression exactly for this reason, avoid taxes on any
loans forgiven or short sale. UNLESS their assets are greater than
liabilities, ie IRAs , etc. I always recommend folks talk to tax pro
before a short sale because of the potential tax consequences.
On Mar 9, 2016 11:40 AM, "tuanl@stevelopezlaw.com [cdcbaa]" wrote:
>
>
> Dear List,
>
> I have a previous client who received a Ch 7 discharge. They stated that
> the IRS is now going after them for taxes on their principal residence that
> was short sold (about $200k less) about a year after the closing of the
> case. My question is since personal liability of the secured lienholder
> was discharged, does the discharge cut off the client's right to claim
> insolvency on the deficiency income for the tax year the property was
> sold? That is the only reasoning I can think the IRS has as their basis
> for all of this.
>
> Thanks,
> Tuan Le
>
>
>
>
Did they fall out IRS Firm 982 re insolvency. Not sure if in effect but was used during depression exactly for this reason, avoid taxes on any loans forgiven or short sale. UNLESS their assets are greater than liabilities, ie IRAs , etc. I always recommend folks talk to tax pro before a short sale because of the potential tax consequences.
On Mar 9, 2016 11:40 AM, "tuanl@stevelopezlaw.com [cdcbaa]" <cdcbaa@yahoogroups.com> wrote:
Dear List,I have a previous client who received a Ch 7 discharge. They stated that the IRS is now going after them for taxes on their principal residence that was short sold (about $200k less) about a year after the closing of the case. My question is since personal liability of the secured lienholder was discharged, does the discharge cut off the client's right to claim insolvency on the deficiency income for the tax year the property was sold? That is the only reasoning I can think the IRS has as their basis for all of this.Thanks,Tuan Le
The post was migrated from Yahoo.