Discussion Archives:Deductable real estate tax during short sale

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Discussion Forum Index --> Advanced Tax Questions --> Deductable real estate tax during short sale


Discussion Forum Index --> Tax Questions --> Deductable real estate tax during short sale

Taxmommyof2 (talk|edits) said:

14 April 2010
i have a client who states that she has not paid her mortgage for over a year (none during 2009) and is in short sale. her mortgage company paid the real estate tax in 2009 (confirmed by county records). she is still living in the house while it is in short sale. i have scoured the IRS website/pub 17, etc and cannot find anything stating that she cannot take that deduction. commonsense says "no", but am i right? has anyone else had this request?

Kevinh5 (talk|edits) said:

14 April 2010
she can only deduct it if she paid it

she's already mooching off the mortgage company not making payments and not paying rent

don't let her mooch off the rest of us taxpayers (I guess that would be the 53%) by allowing her to deduct something she didn't even pay. I don't want her getting a refund at my expense. My TARP money went to the banks to pay for her freeloading.

Taxmommyof2 (talk|edits) said:

14 April 2010
are you a tax professional Kevinh5? sure doesn't sound like it from your post.

please, only professionals respond.

Trillium (talk|edits) said:

14 April 2010
You can click on any user's name, Kimberely, to see what their level of experience and background as a tax pro are. Click on Kevin's user name, above, and you'll see you can (generally!) take his responses to the bank.

Kevinh5 (talk|edits) said:

14 April 2010
you also have to understand that it is after 5 PM on April the 14th, so I'm being a slight bit overdramatic

Taxmommyof2 (talk|edits) said:

14 April 2010
his response was not professional advice that could be take to a bank (of which we taxpayers paid billions of dollars to and have done basically nothing in return).

i posted this question to seek help. apparently i was wrong. i will seek professional advice elsewhere.

Kevinh5 (talk|edits) said:

14 April 2010
one does hope that your client will be attending one of your money coaching classes, though, and hasn't already (!?!)

DaveFogel (talk|edits) said:

14 April 2010
I have come across this situation a few times --- I'm talking about where the mortgage company pays the real estate taxes, not where two posters get into a spat.

The mortgage company doesn't want the property to be involved in a "tax sale," so it pays the taxes and increases the amount of the mortgage loan by the amount paid. One of my clients who hasn't paid her real estate taxes for the past 6 years received a Form 1098 showing that she "paid" the delinquent taxes, and that her mortgage loan was increased by the same amount. I see nothing wrong with taking this deduction because it's as if the taxpayer obtained a loan to pay the taxes.

Kevinh5 (talk|edits) said:

15 April 2010
I don't know about that Dave, we don't let people take the deduction for interest added to the balance of the loan for reverse or negative amortization mortgages. They have to wait until paid off to get the deduction.

Kevinh5 (talk|edits) said:

15 April 2010
and we don't allow a full deduction for mortgage points in the year of purchase if enough cash wasn't paid down or at closing.

DaveFogel (talk|edits) said:

15 April 2010
Kevinh5, it’s very old and well-settled law that if taxes are paid with borrowed money, then they’re deductible when paid, not when the borrowed money is repaid. See Schick v. Commissioner, 22 B.T.A. 1067 (1931).

I’m talking about taxes, and you're referring to rules for the deduction of interest. There are special rules for interest. See IRC §461(g). There are no comparable special rules for taxes.

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