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Capital Gain
Short answer: yes.
Trustee inherits debtor's basis.
David A. Tilem
Certified Bankruptcy Specialist*
Law Offices of David A. Tilem (a debt relief agency)
206 N. Jackson Street, #201, Glendale, CA 91206
Tel: 818-507-6000 Fax: 818-507-6800
* Bankruptcy specialist cert. by State Bar of CA Bd of Legal
Specialization.
\
jbsesq1965
Sent: Monday, January 26, 2009 2:29 PM
To: cdcbaa@yahoogroups.com
Subject: [cdcbaa] Capital Gain
My poterntial debtors have a few properties that may have a few bucks
of equity. They are being sued in a business case and are ready to
wave the white flag to stop the litigation. Asssume fraud is not an
issue and the debtors just want to get on with their life. Assume the
house is fully exempt and thats what they want me to save.
They have two rental properties, and don't care if they lose them.
Tax question. Does the Chapter 7 trustee inherit the debtor's basis?
Facts:
The debtors bought a condo for $100K five years ago and have been
making interest only payments for 5 years. The property is now worth
about $150K. Less costs of sale, it might have $40K in value for a
trustee/estate. The debtors don't have time or the will to try to sell
it, and would be happy for the trustee to get it rather than their
litigation adversary. As I understand it the sale would generate a
$50K cap gain or about $15K in cap gain taxes.
This property was NOT refinanced. If the trustee sells it he must pay
the cap gains tax on the gain BEFORE he starts paying unsecureds,
right? He cannot keep the money and somehow stick my debtors for the
tax, can he/she?
On the second property, virtually same facts, but assume my clients
took a $30K HELOC on the property. In a seven, the trustee could sell
the property but he'd only have about $10K left after paying the first
and second, and that's probably not enough to pay the cap gains. I
always thought that if the trustee sold the property the cap gains
get "trapped" in the BK.
Do the chapter 7 trustees carefully analyze the cap gains consequenses
before moving to sell property? If the debtors can show that a sale
will not generate sufficient funds to pay secured claims and the tax
liability, can the debtors oppose the sale?
Any thoughts would be appreciated.
Jeff Smith
Message
Short answer:
yes.
Trustee inherits debtor's
basis.
David A.
Tilem
Certified Bankruptcy
Specialist*
The post was migrated from Yahoo.
My poterntial debtors have a few properties that may have a few bucks
of equity. They are being sued in a business case and are ready to
wave the white flag to stop the litigation. Asssume fraud is not an
issue and the debtors just want to get on with their life. Assume the
house is fully exempt and thats what they want me to save.
They have two rental properties, and don't care if they lose them.
Tax question. Does the Chapter 7 trustee inherit the debtor's basis?
Facts:
The debtors bought a condo for $100K five years ago and have been
making interest only payments for 5 years. The property is now worth
about $150K. Less costs of sale, it might have $40K in value for a
trustee/estate. The debtors don't have time or the will to try to sell
it, and would be happy for the trustee to get it rather than their
litigation adversary. As I understand it the sale would generate a
$50K cap gain or about $15K in cap gain taxes.
This property was NOT refinanced. If the trustee sells it he must pay
the cap gains tax on the gain BEFORE he starts paying unsecureds,
right? He cannot keep the money and somehow stick my debtors for the
tax, can he/she?
On the second property, virtually same facts, but assume my clients
took a $30K HELOC on the property. In a seven, the trustee could sell
the property but he'd only have about $10K left after paying the first
and second, and that's probably not enough to pay the cap gains. I
always thought that if the trustee sold the property the cap gains
get "trapped" in the BK.
Do the chapter 7 trustees carefully analyze the cap gains consequenses
before moving to sell property? If the debtors can show that a sale
will not generate sufficient funds to pay secured claims and the tax
liability, can the debtors oppose the sale?
Any thoughts would be appreciated.
Jeff Smith
The post was migrated from Yahoo.