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R. Klein, EA
R. Klein, EA, Enrolled Agent
Category: Tax
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Experience:  Over 20 Years experience
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Is a tax lien on a home removed in a foreclosure?? When am

Resolved Question:

Is a tax lien on a home removed in a foreclosure??
When am I eligible for the Mortgage forgiveness??
Submitted: 2 years ago.
Category: Tax
Expert:  R. Klein, EA replied 2 years ago.

Randalltax :

A tax llien has no effect on a foreclosed property, so the new owner can request the lien be removed from the property. It does not remove your obigatn to pay the tax, however.

Randalltax :

You are eligible for the mortgage forgiveness only if your lender cancels the debt during 2012 by sending you a Form 1099-C.

Expert:  R. Klein, EA replied 2 years ago.
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Customer: replied 2 years ago.

I know I am still obligated topay the lien. Since I am in the "Uncollectible staus" with the IRS I should not be forced to pay it still??

To be elibible for mortgage forgiveness can the property be in forclosure and would I be eligible for the forgiveness or not until it is sold??

 

Expert:  R. Klein, EA replied 2 years ago.

A lien is a public document that shows an interest in tangible or real property.

 

If you are in Temporarily Uncollectible status, that will not change.

 

Mortgage forgiveness laws don't apply until a debt has been canceled, which, under ordinary rules, would mean that it is taxable income. Mortgage forgiveness has nothing to do with a bank "forgiving" you. It has to do with the IRS forgiving you the income on the canceled debt.

 

 

Customer: replied 2 years ago.
One more. Since there is a lien on the property which option available to me would be the best way to go for the IRS to forgive the cancelled debt, Foreclosure or Short Sale? Short sale is better but the lien will make this almost preventable because the lien will be seen on the title search. Unless it is removed??
Expert:  R. Klein, EA replied 2 years ago.

I'm not sure what you are trying to accomplish exactly.

 

A foreclosure: You lose the house and the IRS gets nothing because the house sale will not clear the loan balance.

 

A short sale: You sell the house and the IRS gets nothing because the house sale will not clear the loan balance.

 

Only difference: short sale you have to negotiate with the seller, the agent, the lender, the bank, and the IRS to clear the lien so you can sell. Foreclosure: Not your problem any more.

 

None of these has anything to do with a canceled debt.

 

R. Klein, EA, Enrolled Agent
Category: Tax
Satisfied Customers: 2882
Experience: Over 20 Years experience
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