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What is the best plan of action for my property which has been

in default for lack of...
What is the best plan of action for my property which has been in default for lack of payment for approximately 1 year? Options are foreclosure, short sale or deed in lieu of. Loan modification is not an option as my husband has been unemployed since May 2010 and we can not afford even half of the payment. What are the tax consequences for each situation. Am trying to avoid foreclosure so short sale or deed in lieu would be best. Please advise.
Colleen Stanley
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Answered in 18 minutes by:
12/1/2010
Jacy
Jacy, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 568
Experience: Nine years individual income tax preparation and consulting
Verified

Hello,

 

Sorry for your difficulties. This is too common these days.

 

If this property is your main home, then the Mortgage Forgiveness Act will prevent taxes on any forgiveness of debt (as long as the transaction is completed by 12/31/2012.)

 

You are smart to try and avoid foreclosure. Your credit rating will be better if you do.

 

If this property is a second home or rental, let me know the specifics (cost basis, loan amounts, depreciation taken, etc.).

 

Thank you,

 

Jacy

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Customer reply replied 6 years ago

So would you suggest a deed in lieu or short sale?

 

thanks

Colleen

Hello,

 

They are both very similar except with a short sale, the deed is never transferred to the lender. In both cases, you need to make sure the lender is going to forgive any deficiency balance on the loan. The choice to accept a short sale or deed in lieu will be the lenders. I hope they will work with you.

 

Best wishes,

 

Jacy

Jacy
Jacy, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 568
Experience: Nine years individual income tax preparation and consulting
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