Tax Effects Of Foreclosures
Posted by Sandy Miller on Mon, Mar 24, 2008 @ 09:59 PM
Just when you think things couldn't be worse because you've lost your home to foreclosure-here comes the IRS to make things worse. Somewhere deep in the tax code is a concept called Cancellation of Debt (COD). It's pretty complicated but basically says that if debt is forgiven-then it could be taxable unless you can prove an insolvency exception. Confused yet?? I am.
The IRS has created a special Web Section For Homeowners Who Lose Homes: Foreclosure Tax Relief Available to Many. It was designed for people who have lost their homes due to foreclosure. Although mortgage workouts and foreclosures can have tax consequences, special relief provisions can reduce of eliminate the tax bit for financially strapped borrowers who lose their homes. Go to the IRS website http://www.irs.gov
Congress is considering a fix to some of the COD issues-however, they'll probably take so long and complicate it so much...that you'll need to do your research in the meantime.
Sandy, Resident Agents of Nevada - Corporation Formation
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775 882-4641