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RD
RD, Certified Public Accountant (CPA)
Category: Finance
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Experience:  MBA, CPA
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i am short-selling a condo. i have a hard money 1st Trust

Customer Question

i am short-selling a condo. i have a 'hard money' 1st Trust Deed (a refinanced loan). i live in california. this is my primary residence. once the 1st lender files a Notice of Default (making my loan a non-recourse loan) i will have no income from cancellation of debt. but my loan is $400,000 and the property value is $250,000 so my 'gain from foreclosure' is $150,000. and so my question is: is this $150,000 covered by the Debt Relief Act??????
Submitted: 3 years ago.
Category: Finance
Expert:  RD replied 3 years ago.

RD :

Did you own and live in the house as your primary residence for atleast 2 years before the disposition?

Customer :

yes. more than 2 years. but i refinanced. that's my worry. thanks. tom

RD :

Since you lived in the house for more than 2 years, you can exclude the gain from the sale/foreclosure of the condo under Sec 121.

RD :

Hence, you will not owe any tax on the gain.

RD :

fSince this is a non recourse loan, there is no canceled debt and hence, cancellation relief provisions wont apply in your case in any case.

RD, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 8784
Experience: MBA, CPA
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