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tax debt forgiveness
There are 2 components to income taxes as to foreclosure or short sales: debt
cancellation and capital gain. it is possible that taxpayer is liable for
neither. but the analysis need to be done.
Paul Horn
Attorney at Law
Certified Public Accountant
1045 E. Valley Blvd., Suite A215
San Gabriel, CA 91770
800-380-7076
________________________________
To: cdcbaa@yahoogroups.com
Sent: Mon, May 16, 2011 9:41:02 AM
Subject: RE: [cdcbaa] tax debt forgiveness
The return is showing the tax due but attached form 982 with it. It sound like
the CPA needs to fix this. Thanks.
From:cdcbaa@yahoogroups.com [mailto:cdcbaa@yahoogroups.com] On Behalf Of John D.
Faucher
Sent: Monday, May 16, 2011 9:38 AM
To: cdcbaa@yahoogroups.com
Subject: Re: [cdcbaa] tax debt forgiveness
I can't tell you whether the return does show the tax due or not; only someone
looking at the return can do that. If the return shows tax due when filed, the
taxpayer just self-assessed that amount of tax.
If the IRS is essentially asking for an amended return that reports the
transaction and claims the insolvency, do it. As with a bankruptcy petition,
more disclosure up front avoids bigger problems later. IRS Form 982 helps you in
that regard.
John D. Faucher
Hurlbett & Faucher
5743 Corsa Ave., Suite 208
Westlake Village, CA 91362
(818) 889-8080
Fax: (805) 367-4154
http://www.hurlbettfaucher.com/
3324 State Street, Suite O
Santa Barbara, CA 93105
(805) 963-9111
This electronic mail message and any attached files are confidential, contain
information intended for the exclusive use of the individual or entity to whom
it is addressed, and may be legally privileged. If you are not the intended
recipient, please immediately reply to John Faucher (at
818/889-8080 or john@hf-bklaw.com) indicating that you received this message and
then delete the message without delay. Thank you for your cooperation.
Disclosure Under U.S. IRS Circular 230: The recipient may not use any tax advice
contained in this communication, including any attachments, for the purpose of
avoiding federal tax related penalties or promoting, marketing or recommending
to another party any particular transaction or matter.
On 5/16/11 9:23 AM, "stella.havkin" wrote:
>I have a client in chp 13 case. They just filed their 2009 tax return which has
>$100,000 in debt forgiveness tax due to a foreclosure sale on a rental property.
>The return contained an insolvency declaration and as such, my position is that
>he does not owe the tax. I was told the following by the IRS attorney:
>
>
>"If the capital gain is the result of a foreclosure, then there will be debt
>relief income. The debt relief is not includible in income if the taxpayer is
>insolvent or its in a BK. I am not 100% sure that I am right on this, but I
>believe the proper reporting would be to report the transaction and then exclude
>the gain to the extent that the taxpayers were insolvent at the time of the
>foreclosure. So, the return itself would show the transaction but not the tax
>due. This return shows the tax due."
>
>Is she right?
There are 2 components to income taxes as to foreclosure or short sales: debt cancellation and capital gain. it is possible that taxpayer is liable for neither. but the analysis need to be done. Paul HornAttorney at LawCertified Public Accountant1045 E. Valley Blvd., Suite A215San Gabriel, CA 91770800-380-7076From: Stella Havkin <havkinlaw@earthlink.net>To: cdcbaa@yahoogroups.comSent: Mon, May 16, 2011 9:41:02 AM
The post was migrated from Yahoo.
charset="ISO-8859-1"
I can't tell you whether the return does show the tax due or not; only
someone looking at the return can do that. If the return shows tax due when
filed, the taxpayer just self-assessed that amount of tax.
If the IRS is essentially asking for an amended return that reports the
transaction and claims the insolvency, do it. As with a bankruptcy petition,
more disclosure up front avoids bigger problems later. IRS Form 982 helps
you in that regard.
John D. Faucher
Hurlbett & Faucher
5743 Corsa Ave., Suite 208
Westlake Village, CA 91362
(818) 889-8080
Fax: (805) 367-4154
http://www.hurlbettfaucher.com/
3324 State Street, Suite O
Santa Barbara, CA 93105
(805) 963-9111
This electronic mail message and any attached files are confidential,
contain information intended for the exclusive use of the individual or
entity to whom it is addressed, and may be legally privileged. If you are
not the intended recipient, please immediately reply to John Faucher (at
818/889-8080 or john@hf-bklaw.com )
indicating that you received this message and then delete the message
without delay. Thank you for your cooperation.
Disclosure Under U.S. IRS Circular 230: The recipient may not use any tax
advice contained in this communication, including any attachments, for the
purpose of avoiding federal tax related penalties or promoting, marketing or
recommending to another party any particular transaction or matter.
On 5/16/11 9:23 AM, "stella.havkin" wrote:
>
>
>
>
>
> I have a client in chp 13 case. They just filed their 2009 tax return which
> has $100,000 in debt forgiveness tax due to a foreclosure sale on a rental
> property. The return contained an insolvency declaration and as such, my
> position is that he does not owe the tax. I was told the following by the IRS
> attorney:
>
> "If the capital gain is the result of a foreclosure, then there will be debt
> relief income. The debt relief is not includible in income if the taxpayer is
> insolvent or its in a BK. I am not 100% sure that I am right on this, but I
> believe the proper reporting would be to report the transaction and then
> exclude the gain to the extent that the taxpayers were insolvent at the time
> of the foreclosure. So, the return itself would show the transaction but not
> the tax due. This return shows the tax due."
>
> Is she right?
>
>
>
>
>
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I can't tell you whether the return does show the tax due or not; only someone looking at the return can do that. If the return shows tax due when filed, the taxpayer just self-assessed that amount of tax.If the IRS is essentially asking for an amended return that reports the transaction and claims the insolvency, do it. As with a bankruptcy petition, more disclosure up front avoids bigger problems later. IRS Form 982 helps you in that regard. John D. Faucher
The post was migrated from Yahoo.
I have a client in chp 13 case. They just filed their 2009 tax return which has $100,000 in debt forgiveness tax due to a foreclosure sale on a rental property. The return contained an insolvency declaration and as such, my position is that he does not owe the tax. I was told the following by the IRS attorney:
"If the capital gain is the result of a foreclosure, then there will be debt relief income. The debt relief is not includible in income if the taxpayer is insolvent or its in a BK. I am not 100% sure that I am right on this, but I believe the proper reporting would be to report the transaction and then exclude the gain to the extent that the taxpayers were insolvent at the time of the foreclosure. So, the return itself would show the transaction but not the tax due. This return shows the tax due."
Is she right?
The post was migrated from Yahoo.