How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Richard Your Own Question
Richard, Tax Attorney
Category: Tax
Satisfied Customers: 55715
Experience:  29 years of experience as a tax, real estate, and business attorney.
Type Your Tax Question Here...
Richard is online now
A new question is answered every 9 seconds

I have a first mortgage on a house in California (which should

This answer was rated:

I have a first mortgage on a house in California (which should therefore be a non-recourse loan). If it goes into foreclosure, will I have taxable income if the house, on date of seizure, is worth less than the unpaid loan balance?
Welcome! My goal is to do my very best to understand your situation and to provide a full and complete answer for you.

Good morning. Good tax. First, although typically debt forgiveness results in taxable income, under the Mortgage Forgiveness Debt Relief Act of 2007, taxpayers may exclude debt forgiven on their principal residence if the balance of their loan was $2 million or less. The limit is $1 million for a married person filing a separate return. Details are on Form 982 and its instructions. The law has now been extended through the end of December 2013. Second, California is a non-deficiency state where you would not have personal liability for the shortfall. You only have debt forgiveness where you have a recourse loan. If nonrecourse, you are not being forgiven because you owe nothing personally. In some cases, although inappropriate for the lender to issue a 1099-C in a non-recourse state...which is the notice the IRS is given that there has been forgiven....some lenders nonetheless issue them. Should yours do so, you can contest the 1099-C or File the Form 982. Typically in these situations, the Form 982 is the path of least resistance.

Thank you so much for allowing me to help you with your questions. I have done my best to provide information which will be helpful to you. If I have not fully addressed your questions or if you have any follow up questions, or if I have misinterpreted your questions in any way, please do not rate me yet, but simply ask a follow up question without rating so I can provide you with a fully satisfactory answer. If I have fully answered your question(s) to your satisfaction, I would appreciate you rating my service with 3, 4, or 5 faces/stars so I can receive credit for helping you today. I thank you in advance for taking the time to provide me a positive rating!
Richard and other Tax Specialists are ready to help you
Thank you so much for the positive rating! I appreciate having had the opportunity to serve you! If I can be of assistance to you in the future, just look me up and I will be happy to help! For easy access, my bookmark is: