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
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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.