Results 1 to 2 of 2
  1. #1
    Join Date
    Mar 2012
    Posts
    1

    Smile Mortgage Forgiveness Debt Relief Act

    Bob purchased a condo as his primary residence. After residing there for over 2 years, he buys another home and attempts to sell his condo. Failing to sell it, he rents it out. A year later, the condo is empty and Bob can't afford the payments, so the condo will be in foreclosure by the lender. It isn't, yet.

    According to the IRS, canceled debt "used to buy, build or improve a principal residence" is not taxable. Does the fact that Bob later converted the residence to a rental mitigate things? Bob had lived in the condo for 2 out of the last 5 years. The 1099-C will show about $120,000 in debt foregiveness. If Bob has to show this as income, he would be better off to move back into the condo right now.

  2. #2
    Join Date
    Jul 2007
    Location
    Florida
    Posts
    1,904

    Default Re: Mortgage Forgiveness Debt Relief Act

    I seen no qualifyer to the definition of "Qualified Principle Residence Indebtedness" in the IRS pubs. If the mortgage was to buy, build or improve a taxpayer's principle residence then it is excludable. Nothing refers to the home continuing to be a principle residence until the time the debt is cancelled. Form 982 is required.

    Next time, have Bob come here himself :-)

    1. Sponsored Links
       

Similar Threads

  1. Replies: 1
    Last Post: 03-19-2011, 04:41 AM
  2. Replies: 9
    Last Post: 01-27-2011, 06:33 PM
  3. Foreclosure: Mortgage Forgiveness Debt Relief Act and Debt Cancellation
    By ttsmith in forum Real Estate Finance
    Replies: 12
    Last Post: 05-23-2009, 07:52 PM
  4. Foreclosure: The Mortgage Forgiveness Debt Relief Act and Debt Cancellation
    By Zanalystadoc in forum Real Estate Finance
    Replies: 2
    Last Post: 05-15-2009, 08:25 PM
  5. Foreclosure: Mortgage Forgiveness Relief Act and Partial Rental Propty
    By omniskye in forum Real Estate Finance
    Replies: 1
    Last Post: 04-14-2009, 07:52 AM

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •  
 
Forum Sponsor
Free Tax Forms
Download free federal tax forms.




Untitled Document