Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax

I am in default on a second mortgage loan of my personal residence

Customer Question
in California. The bank...
I am in default on a second mortgage loan of my personal residence in California. The bank just made me an offer to settle the $68923.69 debt by paying one final payment of $17,231.00. The bank said they may be required by law to report this settlement to taxing agencies as a forgiveness of $51,692.69 of debt. My questions are:
1. Will I have to report this amount of forgiven debt as income for the 2010 tax year?
2. For tax purposes, can I spread this $51,692.69 of forgiven debt over more than one year?
3. Is it still considered forgiveness of debt in view of the fact that I am losing the house this Friday at a foreclosure sale to satisfy the first mortgage?
4. Do you know of any way I can protect myself from paying taxes on this forgiven debt?
5. Will it make any difference if I pay the $17,231 settlement of the second mortgage before the foreclosure sale this Friday. Or, will it help me taxwise if I pay off the second mortgage after I lose the house?
XXXXX XXXXX
Submitted: 7 years ago.Category: Tax
Show More
Show Less
Ask Your Own Tax Question
Answered in 3 hours by:
2/1/2010
Tax Professional: Chad Oberg, Certified Public Accountant (CPA) replied 7 years ago
Chad Oberg
Chad Oberg, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 174
Experience: 10 + years of accounting and tax experience, financial statements and business planning
Verified

Brad,

 

You may be better off going through the steps of filing out IRS Form 982 and presenting that you were insolvent (if possible) right before the property was lost.

 

1. Yes, unless you qualify for an exclusion from income (see below attachments). Many people do qualify for the exclusion once they determine they are insolvent.

2. No, not based on my current research. There is a provision for business.

3. Yes it is still forgiveness of debt

4. See below

5. It may effect your credit rating. However, I don't know if this will have a significant impact.

 

Take a look at the following attached website from the IRS that help people with these questions:

 

http://www.irs.gov/individuals/article/0,,id=179414,00.html

 

http://www.irs.gov/irs/article/0,,id=179073,00.html

 

http://www.irs.gov/newsroom/article/0,,id=184704,00.html

 

http://www.irs.gov/individuals/article/0,,id=179414,00.html

 

and

 

IRS Publication 4681

http://www.irs.gov/pub/irs-pdf/p4681.pdf

 

IRS Form 982

http://www.irs.gov/pub/irs-pdf/f982.pdf

 

 

The process is complicated; however, it will help protect you from the tax. You may want to get a qualified CPA to help you through the process.

 

If you have any further questions, please do not hesitate to contact me.

 

Regards,

 

Chad

Chad Oberg
Chad Oberg, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 174
Experience: 10 + years of accounting and tax experience, financial statements and business planning
Verified
Chad Oberg and 87 other Tax Specialists are ready to help you
Ask your own question now
Ask Chad Oberg Your Own Question
Chad Oberg
Chad Oberg
Chad Oberg, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 174
174 Satisfied Customers
Experience: 10 + years of accounting and tax experience, financial statements and business planning

Chad Oberg is online now

A new question is answered every 9 seconds

How JustAnswer works:

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

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.WMatteson, 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.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, 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.

OrvilleHesperia, 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!!!!

AlexLos 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.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,300 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,310 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

13,695 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,651 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
I am completing my personal income taxes. For this filing
I am completing my personal income taxes. For this filing year, I left my corporate career to manage my real estate full time. Therefore, the real estate is moving from a passive activity to an active… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Are you familiar with income tax laws on business and
Are you familiar with income tax laws on business and personal returns? … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Can I report rental income in my tax return on a property
Can I report rental income in my tax return on a property thar is owned by my father? He does not live in the US is not a US citizen and can sign a document to allow me to receive the rental… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
Was approved to file a 2016 Form 1065 (and K-1) by IRS.
Was approved to file a 2016 Form 1065 (and K-1) by IRS. However, there were no partners. There was just one person. Thus, the entire 2016 loss is allocable to that one person, since there are no other… read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
723 satisfied customers
I wanted to know if I live in California but want to form an
Hi, I wanted to know if I live in California but want to form an LLC in Indiana for real estate purposes, do I need an Indiana address or can I use my California business address? … read more
abci168
abci168
Principal
27 satisfied customers
RE: FOREIGN TAX CREDIT We're filing a married joint filing
RE: FOREIGN TAX CREDIT We're filing a married joint filing tax return and have come up against some problems on form 1116. 1) Do we add both our names on the form? 2) On line 3a, it asks for certain i… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,458 satisfied customers
We have been filing income taxes as married, filing jointly,
Hello My name is*****: What state are you in? It matters because laws vary by location. Customer: We have been filing income taxes as married, filing jointly, in California … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
A Form 1041 is filed for a Credit Shelter Trust & shows a
A Form 1041 is filed for a Credit Shelter Trust & shows a loss on the Taxable Income line (Page 1, line 22). Is this loss carried forward?… read more
abci168
abci168
Principal
27 satisfied customers
I'm started a California IRS1031 and have 100K personal loan
I'm started a California IRS1031 and have 100K personal loan on property that was held many years for investment. I only made about $12K this year in Oregon. How much should I withhold as boot to pay for anticipated 2017 taxes? … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
I have inherited a property in California that is currently
I have inherited a property in California that is currently in escrow. How will I be taxed for the money I make on the sale of the property? … read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
723 satisfied customers
What is the purpose of irs form 2297. by signing this form,
what is the purpose of irs form 2297. by signing this form , am i giving up my right to my past refund? … read more
abci168
abci168
Principal
27 satisfied customers
NYS can collect personal income tax for 20 years? But the
Hi - So NYS can collect personal income tax for 20 years? But the Fed can only collect for 10? … read more
abci168
abci168
Principal
27 satisfied customers
Can house maintenance and property taxes be deducted on form
Hello. Can house maintenance and property taxes be deducted on form 1041 for a house owned by decedent prior to the Executors selling it? … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
How do I request my 2016 Individual Personal Income Tax form
Sir, how do I request my 2016 Individual Personal Income Tax form (form 1040) on line? … read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,458 satisfied customers
Determining what is considered personal property in
determining what is considered personal property in california....e.g. investment accounts, savings accounts, checking account … read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,217 satisfied customers
Do you have help for ira tax law? i am in california, but
My aunt left her ira to my mother, my mother died this year and left it to me. From what i understand I must pay this year based on my mother's age. Is that correct? What age do I use in my calculations for next year? My age, my aunts age or my mother's age?… read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,217 satisfied customers
IRS form 8832 was never filled out or filed to designate tax
IRS form 8832 was never filled out or filed to designate tax treatment for a corp i created. the corp oissued shares but never distributed them..( one owner)...there were two positions for the corp. A… read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,217 satisfied customers
For 2015 the 5498 tax form was not filed with the IRS, but
Hi, for 2015 the 5498 tax form was not filed with the IRS, but the rollover has happened. Now the IRS is requiring us to pay taxes on the distributed amount. Is it sufficient to send them the 5498 for… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x