Question : What does foreclosure mean for my taxes?
A property that I am a co-signer on is going into foreclosure. In a question I asked previously regarding this matter, someone pointed out that I will be sent a 1099-c form. What exactly does this mean? If the house is sold at auction will I owe taxes on the amount the house sells for or the amount that was owed or, if the house does not sell for enough, will I owe taxes on the amount not paid?If we can sell the house before the foreclosure is complete, how does that impact the situation? I'm so confused.And please, no posts about your tax or loan company. I will report it as abuse.
- asked by blavelin
All Answers:
Answer #1
It means that if you cannot pay your mortgage, howwould you be able to pay your taxes.
- answered by Dan
Answer #2
General RuleGenerally, if your debt is canceled orforgiven, other than as a gift or bequest to you,you must include the canceled amount in grossincome for tax purposes. Report the canceledamount on line 10 of Schedule F if you incurredthe debt in your farming business. If the debt isa non business debt, report the canceled amount online 21 of Form 1040. Form 1099-C. If a federalagency, financial institution, credit union,finance company, or credit card company cancels orforgives your debt of $600 or more, you willreceive a Form 1099-C, Cancellation of Debt. Theamount of debt canceled is shown in box 2.However,income from cancellation of debt is not taxed ifany of the following conditions apply:Thecancellation is intended as a gift. The debt isqualified farm debt (see chapter 4 of Publication225, Farmer’s Tax Guide). The debt is qualifiedreal property business debt (see chapter 5 ofPublication 334, Tax Guide for Small Business).You are insolvent or bankrupt (see Publication908). Now, I think you would be better off sellingthe house, and talk to your lender about a "shortsale"--where they will take a lesser amount duethem, from a qualified buyer--because they reallydon't want to be in the business of selling homeseither. Good luck...
- answered by BillW
Answer #3
I know most of the answer.If the property is apersonal residence and sells for more than themortgage amount, but less than a gain of $250k fora single filer ($500k for a married filer), thenthere are no tax implications- assuming certainrules under the IRC are met.If the personalproperty sells for less than the outstandingmortgage amount plus interest, costs, and fees,then it depends on what the lender does. If thelender gets a deficiency judgement and goes afterthe borrower for the rest, then again, thereshould be no tax implications- yet. If the lenderwrites off the deficiency, this write off istaxable income to someone. If the primary borrowerdoes not pay it, then it is possible that the IRScould come after you (this is the one part of myanswer about which I am not 100% certain).If theproperty is classified as business or tradeproperty, then there WILL be a taxable gain orloss on the property that someone has to claim.Again, the IRS will make sure that someone pays.
- answered by Homer J. Simpson
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