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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 10107
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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For accountant I have an asset that I bought foo 100k, many

Customer Question

for accountant
I have an asset that I bought foo 100k , many years ago,
During that time the asset has appreiciaed a great deal and now , I have run into finaincial problems and that asset is going to be repossessed, I owe 560k on it and it sells for 560 k
on what amount is the capital gain calculated
Submitted: 2 months ago.
Category: Tax
Expert:  Lane replied 2 months ago.

Hi. My name's Lane. I can help here.

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As it looks like you understand, foreclosure, (short sale and deed in lieu, as well) are "deemed sales," by IRS.

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Capital gain is essentially sales price minus basis, (where basis is purchase price plus improvements minus any depreciation is this was a depeciatble asset).

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If the loan on the asset is non-recourse debt, then the sale price is the full amount of the outstanding debt, as reflected on Form 1099-A.

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If the taxpayer is personally liable, (recourse debt) the sale price is the lesser of the balance of the principal mortgage debt outstanding or the fair market value

Expert:  Lane replied 2 months ago.

Please let me know if you have any questions at all, before rating me

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If this HAS helped, and you DON’T have other questions … I'd appreciate a positive rating (using the stars or faces on your screen, and then clicking “submit") ... Otherwise JA doesn't credit me for the work here.

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Thank you!

Lane

I hold a law degree, with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in financial accounting & tax, a BBA, and CFP & CRPS designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice, since 1986.

Customer: replied 2 months ago.
I don't understand please give me a number
Customer: replied 2 months ago.
I owe 560k and it is personally guaranteed and it gets repossessed , it's a corporate asset, the creditor gets his 560 in the same
Customer: replied 2 months ago.
your saying if I bought for 100k and the sale was for 560 then my capital gain is 460k
Customer: replied 2 months ago.
The market might be for greater amount ?
Expert:  Lane replied 2 months ago.

That's right ... unless the Fair market value or loan amount is less (lesser of) ... Or the loan was non-resourse, meaning that you are are not personally responsible and the loan completely satisfied the debt, then it's simply the debt amount

Expert:  Lane replied 2 months ago.

So, debt amount OR lesser of debt or fair market (depending on the type of loan).

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Sounds like it's likely 460.

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Customer: replied 2 months ago.
I'm in NYC in a high tax bracket the capital gain from the repossession will cause me to have to sell my property , is the a solution to that ?
Expert:  Lane replied 2 months ago.

you mean your other property?

Customer: replied 2 months ago.
I wouldn't have enough to pay the gain I have to sell one of my properties
Customer: replied 2 months ago.
A personal property
Expert:  Lane replied 2 months ago.

.. just want to make sure I understand... You're saying that the tax bill from this would cause you too sell OTHER property in order to pay the bill?

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OK

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Although form 982 can be used in the case of insolvency, principal residence or bankruptcy that cause COD income (not the capital gain, but the income that arises from having borrowed the money and then not repaid).

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The capital gain, itself, can't be excluded ... there are payment plans with IRS, bankruptcy, which may protect te property (ch 13 OR ch 7)

Expert:  Lane replied 2 months ago.

The tax MAY not be as bad as you think:

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Long-term gains and qualified dividends taxed at

  • 0% if taxable income falls in the 10% or 15% marginal tax brackets
  • 15% if taxable income falls in the 25%, 28%, 33%, or 35% marginal tax brackets
  • 20% if taxable income falls in the 39.6% marginal tax bracket

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460,000 x .15 = 69000

Expert:  Lane replied 2 months ago.

Please let me know if you have any questions at all, before rating me

...

If this HAS helped, and you DON’T have other questions … I'd appreciate a positive rating (using the stars or faces on your screen, and then clicking “submit") ... Otherwise JA doesn't credit me for the work here.

...

Thank you!

Lane

I hold a law degree, with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in financial accounting & tax, a BBA, and CFP & CRPS designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice, since 1986.

Customer: replied 2 months ago.
I have 10 of these assets so 10 times 69k
Customer: replied 2 months ago.
What could bankruptcy do ?
Expert:  Lane replied 2 months ago.

10 separate bought for 100 each and selling for 560 ea, with 560 of debt on ea? ,,, yes, you be at 10 x 69000 except the cap gains tax woud be higher as the majority of this $5,600,000 of property would be at the highest capital gains rate is ll forclosed ("sold") in the same tax year

Expert:  Lane replied 2 months ago.

CH 13:

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How a tax debt will be treated in Chapter 13 bankruptcy depends on whether it’s a priority or nonpriority tax obligation. Priority tax debts are not dischargeable in bankruptcy and you must pay them off in full through your CG 13 repayment plan

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In contrast, nonpriority tax obligations are treated the same as your other general unsecured debts (such as credit cards and medical bills) and wiped out when you receive your discharge.

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While this may not sound ideal, Chapter 13 bankruptcy actually provides debtors a convenient and affordable way to pay their tax debts over a three to five year period

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If you have older income tax obligations, you may be able to discharge them in Chapter 13 bankruptcy if they qualify as nonpriority tax debts

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In general, an income tax debt will be considered nonpriority if:

  • the tax return was due at least three years before you filed your bankruptcy (including any extensions you received)
  • you filed the return at least two years prior to filing for bankruptcy
  • the IRS has not assessed your liability for the tax debt within the 240 days before you filed for bankruptcy (but be aware that this 240-day limit can be extended if you previously submitted an offer in compromise or filed for bankruptcy and caused the IRS to stop its collection efforts), and
  • you did not commit fraud or willful tax evasion.

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SO buying some time and then filing when more of the debt is non-priority is on way to go ... next I'll discuss CH 7

Expert:  Lane replied 2 months ago.

Ch 7

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You will be able to get rid of your tax debts in Chapter 7 bankruptcy if you meet the following requirements:

  • The taxes are income-based. Income taxes are the only kind of debt that Chapter 7 is able to discharge. The tax debt must be for federal or state income taxes or taxes on gross receipts.
  • The return was due at least three years ago. The taxes must be from a tax return that was due (including all valid extensions) at least three years before you filed for bankruptcy. For example, if taxes were disclosed in a 2005 income tax return for which extensions to file the return expired on October 15, 2006, the tax return due date test will be satisfied if the bankruptcy petition is filed after October 15, 2009.
  • You filed the return at least two years ago. You must have filed the tax return at least two years before filing for bankruptcy. In most courts, a late return does not count as a "return" and you won't be able to discharge the taxes (late means your extensions have expired and the IRS filed a substitute return on your behalf). In other courts, you can discharge tax debt even if you file a late return, assuming you meet the other criteria.
  • The taxes were assessed at least 240 days ago. The taxing authority must have assessed the tax (entered the liability on the taxing authority’s records) against you at least 240 days before you filed for bankruptcy. This time limit may be extended if there was an offer in compromise between the taxing authority and you or if you had previously filed for bankruptcy.
Expert:  Lane replied 2 months ago.

So again, filing right away won't help OTHER than possibly to protect the other assets while you make the payments, or as they settle

Customer: replied 2 months ago.
if the tax bill was in 2016 and I filed bankruptcy in 2016 or 17 that's ng
Customer: replied 2 months ago.
That won't help the tax bill
Expert:  Lane replied 2 months ago.

That's right ... so sorry (for chaper 7 ... unless you put together a strategy to file later, you wouldnt be the first) and again ch 13 would spread it out over 5 years .. and protect the other property.

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For the tax piece only, a 72 month payment plan might be a better option.

Customer: replied 2 months ago.
unless you put together a strategy to file later, you wouldnt be the first) ?
Customer: replied 2 months ago.
What did that mean
Expert:  Lane replied 2 months ago.

It means that MANY try to set up things such they the are able to defer many of the events in any way that they can - re-finance, additional loan, payment plan, etc. - so that they can make it to the time where the tax CAN be included in the bankruptcy

Customer: replied 2 months ago.
Sorry I don't understand
Customer: replied 2 months ago.
I postpone the lenders selling of the assets ? How would I postpone that income to another years later
Expert:  Lane replied 2 months ago.

So sorry. I don't know your situation well enough to know that.

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Chapter 113 bankruptcy lets you keep your assets as long as you start making the payments, for example

Expert:  Lane replied 2 months ago.

Have things gotten so far down the road that there are NO prospects for renegotiating the loans ... ?

Customer: replied 2 months ago.
Customer: replied 2 months ago.
My situation is complicated are you available for consultation
Expert:  Lane replied 2 months ago.

Not this evening, so sorry. I can set up a call for tomorrow if that would work?

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I'll be in the office at 10:00, and have one meeting at 11:30 ... pretty much anything else works, if that works for you

Expert:  Lane replied 2 months ago.

(eastern time here - Atlanta)

Customer: replied 2 months ago.
what number do I call
Expert:  Lane replied 2 months ago.

Just made the offer ... this is so we'll get the encrypted link to enter contact info confidentially (not even the JustAnswer folks are privy)

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I made the offer for the smallest amount they'll allow ($5). Once you accept I (and you) will get a link to enter the infotmation

Expert:  Lane replied 2 months ago.

DId you see the call offer?

Expert:  Lane replied 2 months ago.

DO you still want the consult?

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