How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask Paul Taliefero Your Own Question

Paul Taliefero
Paul Taliefero, Enrolled Agent
Category: Tax
Satisfied Customers: 239
Experience:  19 years of experience in income taxes
6159
Type Your Tax Question Here...
Paul Taliefero is online now
A new question is answered every 9 seconds

A couple sold their home that they lived in for 15 ...

Customer Question

A couple sold their home that they lived in for 15 years(sold 3-17-06)Then they bought another home at that time, and after 6 months the husband moved out.They separated and are proceeding with a divorce. The new home they bought,, the wife lived in for a total of 16 months and the husband for 6 months,, The question is : If they sell the home after 3-17-08 as a "Short Sale" (they are in financial difficulty) will they be excluded from a 1099 tax (on the dept relief) from the mortgagor, based on the 2007 Dept Relief ACT. And doesn't the divorce qualify for an exemption of the 2 out of the last 5 year ruling? I want to make sure that my clients will not be 1099 for the dept reilf,, please respond,,,,thank you
Submitted: 6 years ago.
Category: Tax
Expert:  Paul Taliefero replied 6 years ago.

I would think that the short sale does apply here. This is debt forgiveness that pertains to acquisition debt. You can read a brief synopsis of the law below:

Highlights from Project Vote Smart

The following is Project Vote Smart's highlights for this bill, graciously made available by PVS:

  • - Excludes the debt forgiven on a qualified principal residence from the definition of gross income subject to income tax (Sec. 2).
  • - Reduces the income tax breaks on most gains from the sales of non-primary residences using a formula based on the amount of time that the taxpayer actually lived in the property during the five-year period before the sale (Sec. 5).
  • Congressional Research Service Summary

    The following summary is provided by the Congressional Research Service, which is a nonpartisan government entity that serves Congress and is run by the Library of Congress. The summary is taken from the official website THOMAS.

    12/20/2007--Public Law. (This measure has not been amended since it was passed by the Senate on December 14, 2007. The summary of that version is repeated here.) Mortgage Forgiveness Debt Relief Act of 2007 - Amends the Internal Revenue Code to exclude from gross income amounts attributable to a discharge, prior to January 1, 2010, of indebtedness incurred to acquire a principal residence. Limits to $2 million the excludable amount of such indebtedness. Reduces the basis of a principal residence by the amount of discharged indebtedness excluded from gross income. Disallows an exclusion for a discharge of indebtedness on account of services performed for the lender or any other factor not directly related to a decline in the value of the residence or to the financial condition of the taxpayer.

    Sets forth rules for determining the allowable amount of the exclusion for taxpayers with nonqualifying indebtedness and taxpayers who are insolvent. Extends through 2010 the tax deduction for mortgage insurance premiums. Sets forth alternative tests for qualifying as a cooperative housing corporation for purposes of the tax deduction for payments to such corporations. Qualifies a corporation if: (1) 80% or more of the total square footage of the corporation's property is used or available for use by its tenant-stockholders for residential purposes, or (2) 90% of the corporation's expenditures are for the acquisition, construction, management, maintenance, or care of its property for the benefit of the tenant-stockholders. Allows members of a qualified volunteer emergency response organization (i.e., an organization that provides firefighting and emergency medical services) an exclusion from gross income for state and local tax benefits and for certain payments for services. Terminates such exclusion after 2010. Allows certain full-time students who are single parents and their children to live in housing units eligible for the low-income housing tax credit provided that their children are not dependents of another individual (other than a parent of such children). Allows a surviving spouse to exclude from gross income up to $500,000 of the gain from the sale or exchange of a principal residence owned jointly with a deceased spouse if the sale or exchange occurs within two years of the death of the spouse and other ownership and use requirements have been met. Increases the penalty for failure to file a partnership tax return and extends from five to 12 the number of months in which such penalty may be imposed. Limits disclosure of tax return information that includes individual taxpayer identify information. Imposes an additional penalty on S corporations for failure to file required tax returns. Amends the Tax Increase Prevention and Reconciliation Act of 2005 to increase the estimated tax payment due in the third quarter of 2012 for corporations with assets of at least $1 billion.

    Notice the first few paragraphs, particularly the paragraph beginning with "Public Law". I base my opinion on this reading.

    I hope that this helps.

    Paul Taliefero, Enrolled Agent
    Category: Tax
    Satisfied Customers: 239
    Experience: 19 years of experience in income taxes
    Paul Taliefero and 6 other Tax Specialists are ready to help you
    Customer: replied 6 years ago.
    So that my clients will not have to pay taxes on the dept relief,, right? as long as the short sale closes after 3-17-08? Is there any other benefit you know of going with a short sale vs a foreclosure? from a tax position? other than the integrity issue with the lender. We have a sale authorized from the lender already to close on 3-27-08.. Thank you very much for your help

    JustAnswer in the News:

     
     
     
    Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
    JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
    Web sites like justanswer.com/legal
    ...leave nothing to chance.
    Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
    Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
    I will tell you that...the things you have to go through to be an Expert are quite rigorous.
     
     
     

    What Customers are Saying:

     
     
     
    • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
    < Last | Next >
    • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
    • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
    • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
    • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
    • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
    • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
    • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
     
     
     

    Meet The Experts:

     
     
     
    • Wallstreet Esq.

      Tax Attorney

      Satisfied Customers:

      570
      10 years experience
    < Last | Next >
    • http://ww2.justanswer.com/uploads/KU/KUMI95/2013-9-30_195031_kumar.64x64.jpg Wallstreet Esq.'s Avatar

      Wallstreet Esq.

      Tax Attorney

      Satisfied Customers:

      570
      10 years experience
    • http://ww2.justanswer.com/uploads/CU/Cuttinggirl/2011-10-29_03719_wcrop2.64x64.jpg Wendy Reed's Avatar

      Wendy Reed

      Enrolled Agent

      Satisfied Customers:

      3052
      15+ years tax preparation and tax advice.
    • http://ww2.justanswer.com/uploads/CATax/2009-08-04_204548_Mark.jpg Mark D's Avatar

      Mark D

      Enrolled Agent

      Satisfied Customers:

      985
      MBA, EA, Specializing in Business and Individual Tax Returns and Issues
    • http://ww2.justanswer.com/uploads/IN/insearchoftheanswer/2013-8-16_0233_attorney.64x64.jpg Richard's Avatar

      Richard

      Tax Attorney

      Satisfied Customers:

      3229
      29 years of experience as a tax, real estate, and business attorney.
    • http://ww2.justanswer.com/uploads/MY/MyVirtualCPA/2012-7-5_44024_cookmegan1.64x64.jpg Megan C's Avatar

      Megan C

      Certified Public Accountant (CPA)

      Satisfied Customers:

      6121
      Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
    • http://ww2.justanswer.com/uploads/JG/jgordosea/2012-6-7_43138_GordosVeritas.64x64.jpg jgordosea's Avatar

      jgordosea

      Enrolled Agent

      Satisfied Customers:

      2783
      I've prepared all types of taxes since 1987.
    • http://ww2.justanswer.com/uploads/OZ/ozaukeecpa/2012-6-7_193219_Picture1croppedandshrunk.64x64.jpg MequonCPA's Avatar

      MequonCPA

      Certified Public Accountant (CPA)

      Satisfied Customers:

      2231
      CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.
     
     
     
    Chat Now With A Tax Professional
    Paul Taliefero
    Paul Taliefero
    220 Satisfied Customers
    19 years of experience in income taxes