Central District Consumer Bankruptcy Attorney's Association

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Wonderful, thanks very much Dennis.
15355 Brookhurst St., Suite 202
Westminster, CA 92683
714-418-9735
714-418-9738 (fax)
Wonderful, thanks very much Dennis. Law Office of Jeffrey A. Cancilla & Associates15355 Brookhurst St., Suite 202Westminster, CA 92683714-418-9735714-418-9738 (fax)

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Here is a link to IRS that discusses certain tax-free mortgage workouts for 07, 08 and 09 and includes links to forms and FAQs:
http://www.irs.gov/irs/article/0,,id9073,00.html
jeffreycancilla wrote: This was discussed at a CDCBAA meeting, but my notes are incomplete.
For each of the following situations, is there a cancellation of debt
or other tax liability attached?
1. Short Sale (lender approves of sale of property for less than
mortgage debt and market value of property is less than mortgage debt).
2. As part of short sale, second lender agrees to cancel the loan and
release its lien in return for a small percentage of its loan amount.
3. Non-judicial foreclosure (probably won't affect answer, but to
complete hypothetical, lender takes property at trustee sale and then
sells as REO at less than loan amount).
4. As part of non-judicial foreclosure, second lender's lien is wiped
out.
5. Deed-in-lieu of foreclosure.
6. As part of deed-in-lieu of foreclosure, second lender agrees to
cancel the loan and release its lien for a small percentage of its loan
amount.

Short sale is most urgent of the questions, but answers to others would
also be appreciated. Thank you in advance.
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Here is a link to IRS that discusses certain tax-free mortgage workouts for 07, 08 and 09 and includes links to forms and FAQs: http://www.irs.gov/irs/article/0,,id907 ... eycancilla <jeffreycancilla@yahoo.com> wrote: This was discussed at a CDCBAA meeting, but my notes are incomplete. For each of the following situations, is there a cancellation of debt or other tax liability attached? 1. Short Sale (lender approves of sale of property for less than mortgage debt and market value of property
is less than mortgage debt). 2. As part of short sale, second lender agrees to cancel the loan and release its lien in return for a small percentage of its loan amount. 3. Non-judicial foreclosure (probably won't affect answer, but to complete hypothetical, lender takes property at trustee sale and then sells as REO at less than loan amount). 4. As part of non-judicial foreclosure, second lender's lien is wiped out. 5. Deed-in-lieu of foreclosure. 6. As part of deed-in-lieu of foreclosure, second lender agrees to cancel the loan and release its lien for a small percentage of its loan amount. Short sale is most urgent of the questions, but answers to others would also be appreciated. Thank you in advance.
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> This was discussed at a CDCBAA meeting, but my notes
> are incomplete.
> For each of the following situations, is there a
> cancellation of debt
> or other tax liability attached?
> 1. Short Sale (lender approves of sale of property
> for less than
Short sale requires cancellation of debt. But you
must give more facts, if the debtor paid more for the
property than the short sale price, the debtor's basis
(unless there was rolled in unrecognized income from
another home) minus the short sale price should be a
comparable loss.
If the debtor refinanced and ate the home (refinance
after value of home increased, money taken and used
for food, or whatever (I call this eating your house))
the discharge of indebtedness is plain vanilla income
(to the extent debtor is solvent)
> mortgage debt and market value of property is less
> than mortgage debt).
> 2. As part of short sale, second lender agrees to
> cancel the loan and
> release its lien in return for a small percentage of
> its loan amount.
Cancellation again, but see reply to 1 about taxable
gain.
> 3. Non-judicial foreclosure (probably won't affect
> answer, but to
> complete hypothetical,
Analysis ends here. Lenders actions after the lender
owns the property only go on the lender's tax return.
lender takes property at
> trustee sale and then
> sells as REO at less than loan amount).
> 4. As part of non-judicial foreclosure, second
> lender's lien is wiped
> out.
The wiped out lien does not equal a wiped out debt.
Unless the debt is forgiven, the note is still
collectible and there is no forgivness.
> 5. Deed-in-lieu of foreclosure.
what is the sale price? Is it the full lien? Then no
cancellation. But who takes a Deed-in-lieu? Almost
no one, cause the deed conveys all of the debtor's
defective title (junior liens, tax liens, judgment
liens) foreclosure sale gives good, clean title
report.
> 6. As part of deed-in-lieu of foreclosure, second
> lender agrees to
> cancel the loan and release its lien for a small
> percentage of its loan
> amount.
discharge of indebtedness income to extent debtor
solvent.
>
> Short sale is most urgent of the questions, but
> answers to others would
> also be appreciated. Thank you in advance.
>
>
dennis

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This was discussed at a CDCBAA meeting, but my notes are incomplete.
For each of the following situations, is there a cancellation of debt
or other tax liability attached?
1. Short Sale (lender approves of sale of property for less than
mortgage debt and market value of property is less than mortgage debt).
2. As part of short sale, second lender agrees to cancel the loan and
release its lien in return for a small percentage of its loan amount.
3. Non-judicial foreclosure (probably won't affect answer, but to
complete hypothetical, lender takes property at trustee sale and then
sells as REO at less than loan amount).
4. As part of non-judicial foreclosure, second lender's lien is wiped
out.
5. Deed-in-lieu of foreclosure.
6. As part of deed-in-lieu of foreclosure, second lender agrees to
cancel the loan and release its lien for a small percentage of its loan
amount.
Short sale is most urgent of the questions, but answers to others would
also be appreciated. Thank you in advance.

The post was migrated from Yahoo.