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We were in the process of our home being foreclosed in ...

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We were in the process...
We were in the process of our home being foreclosed in Sept. 2007 (house was up for sale by us) so we just walked away from home which we were adviced to do my mortgage company since we were not going to be able to keep it from being foreclosed on.We had been served foreclosure notices a few times during the year and managed by loans from family to stop foreclosure.My question now is how do I claim this on taxes or is there anything to claim. I know that I sent rougly 30,000.00 to mortgage company during the year but they are telling me that all went to legal fees, etc. and none of it was interest. Do I show some kind of loss since I did lose home.
Submitted: 9 years ago.Category: Tax
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4/1/2008
Tax Professional: Ed Johnson, Tax Preparer replied 9 years ago
Ed Johnson
Ed Johnson, Tax Preparer
Category: Tax
Satisfied Customers: 10,760
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If the home was not forclosed on, there is nothing to worry about for taxes.

However, all the interest is deductable on schedule A as well as any late fees

since the legal fees were essentially for saving your home, they can be added to cost basis to reduce capital gains when you sell the home.

Ed Johnson
Ed Johnson, Tax Preparer
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Customer reply replied 9 years ago
Mortgage Co. "took" home..They are telling me that NO interest was paid in 2007 and they sold home a month after we left so they got whatever gain came form it. We lost all of it..Deposit we put down 7 years ago, improvements, etc.
Tax Professional: Ed Johnson, Tax Preparer replied 9 years ago

Dear nanabrown,

thanks for the additional information. wow...I find it hard to believe no intetest was paid in 2007. But I guess it can happen. I am not sure a vioaltion of the law did not exist. YOu should see an attorney about that.

in the mean time:

did you receive a 1099 A or 1099 C?

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Customer reply replied 9 years ago
That is exactlly what I am thinking...I know that I send some payments for the year.. No I have not received anything form them and everytime I ask for something showing that I lost home or whatever they tell me there is nothing. Mortgage Co. was a "hard equity lender" so there you go...
Tax Professional: Ed Johnson, Tax Preparer replied 9 years ago

Was anypart of the debt forgiven?

 

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Customer reply replied 9 years ago
I had borrowed $325,000.00 from the company and when we got ready to sell home they said because of foreclosure fees, late fees, etc. and paying the loan off earlier my balance was $399,999.00..This was in a year's time...I am not sure what the house sold for but I heard that is was around $380,000.00 and Mortgatge Co. had told me if I just walked off from home they would not come after me for any remaining balance.
Tax Professional: Ed Johnson, Tax Preparer replied 9 years ago

Dear nanabrown,

they shoudl be giving you a document, a 1099 of some kind. something does not seem right here.

You can contact the IRS and ask for assistance in getting a 1099 from them.

the reason you want to do this is to resolve the issue of the loan foreclosure.

Technically by regulation you have to get a 1099-C or A, and you would have to determined any capital gains or any taxable income from forgiveness of any debt.

Now do not panic. Because of the two rules, you would not have any tax liabilty in actuallity. But you have to do the paperwork in order to take advantage. The IRS can come back 10 years for tax debt, but you can only go back three years for a refund.

If you get a1099 A, which is what you should get, you would have to figure any capital gains, but since you are also able to invoke a capital gains exclusion of 250,000 if finling seperate, and 500,000 if filing jointly, you can avoid any capital gains tax.

If there was no capital gains and there was a sale price short fall on the sell of the porperty versus the debt, then you would have to pay tax on the fogiven debt, but would complete a form 982 to avoid the tax under the new rules of the mortgage forgiveness act.

 

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