Discussion:Short sale of rental property
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| Revision as of 14:34, 8 December 2008 Kevinh5 (Talk | contribs) (but you are corr) ← Previous diff |
Revision as of 17:18, 8 December 2008 Tiredoftaxes (Talk | contribs) (I have read the) Next diff → |
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| {{ForumReplyPost|UserID=Kevinh5|Date=8 December 2008|Text=but you are correct, the relief is for primary residences only (so far).}} | {{ForumReplyPost|UserID=Kevinh5|Date=8 December 2008|Text=but you are correct, the relief is for primary residences only (so far).}} | ||
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| + | {{ForumReplyPost|UserID=Tiredoftaxes|Date=8 December 2008|Text=I have read the discussions to date. I understand that I need to find out if it is non-recourse or recourse debt. The facts of the case are the adjusted basis is $132500 and the mortgage balance is $115000 and the short sale price is $100000. If I understand correctly, there would be a loss of $32500 on the sale of the rental property on form 4797 and there would be COD income of $15000. Overall there would be a net loss effect on the tax return. | ||
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| + | The other option would be that it was his personal residence for 2 out of the last 5 years (He only rented it out the last 2 years after he remarried). If I understand that correctly, he could exclude the gain with the exception of the depreciation taken of $7100. But that doesn't seem to make much sense because he would not beable to take the the loss on the sale. | ||
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| + | Is there any real differce if they go into foreclosure or take the short sale? | ||
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| + | Just wondering if I am going in the correct direction. Also, is there talk of extending the mortgage forgiveness debt relief act of 2007 to rental properties? | ||
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| + | Thanks for any input.}} | ||
Revision as of 17:18, 8 December 2008
Discussion Forum Index --> Basic Tax Questions --> Short sale of rental property
Discussion Forum Index --> Tax Questions --> Short sale of rental property
Tiredoftaxes (talk|edits) said: | 8 December 2008 |
| I have a client who has rental property that is valued less than the mortgage. He is behind on the payments for 2 months. He has been offered a short sale and is trying to decide whether to accept it or let it go into foreclosure. He would rather take a hit on his credit rating than have to pay taxes on any income. Does anybody have any experience in this area? From what I understand, the mortgage forgiveness debt relief act of 2007 does not apply because it is a rental property. | |
| 8 December 2008 | |
| I'd try the search first: [Here is an example] of a search that would be helpful. | |
| 8 December 2008 | |
| but you are correct, the relief is for primary residences only (so far). | |
Tiredoftaxes (talk|edits) said: | 8 December 2008 |
| I have read the discussions to date. I understand that I need to find out if it is non-recourse or recourse debt. The facts of the case are the adjusted basis is $132500 and the mortgage balance is $115000 and the short sale price is $100000. If I understand correctly, there would be a loss of $32500 on the sale of the rental property on form 4797 and there would be COD income of $15000. Overall there would be a net loss effect on the tax return.
The other option would be that it was his personal residence for 2 out of the last 5 years (He only rented it out the last 2 years after he remarried). If I understand that correctly, he could exclude the gain with the exception of the depreciation taken of $7100. But that doesn't seem to make much sense because he would not beable to take the the loss on the sale. Is there any real differce if they go into foreclosure or take the short sale? Just wondering if I am going in the correct direction. Also, is there talk of extending the mortgage forgiveness debt relief act of 2007 to rental properties? Thanks for any input. | |
