Tax

Have a tax question? Ask a tax Expert

Ask an Expert,
Get an Answer ASAP!

This answer was rated:

In 2010 we did a home modification loan on our first loan and…

In 2010 we did a...
In 2010 we did a home modification loan on our first loan and the second loan on the home was discharged. Both loans were for 100% of the purchase price. The second loan was picked up by another lender who is trying to collect on the second, but we are thinking of making a cash offer to settle. If we do come to a settlement, are we going to be held accountable for taxes on the forgiven amount of the loan? Any information would be helpful. Thank you.

Marcia Hovde
Sun lakes, AZ
Show More
Show Less
Ask Your Own Tax Question
Answered in 2 minutes by:
8/29/2013
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 14,672
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified

NPVAdvisor :

No, thankfully the Mortgage Forgiveness Debt Relief Act survived the fiscal cliff when it was given a one year extension through 2013. Homeowners who sell their primary residence in a short sale or lose their home to foreclosure will not have to pay taxes on the loss up to $2 million ($1 million if married filing separately)

Customer:

Since we did not go into foreclosure or short sale, but did the government modification, do we still qualify?

NPVAdvisor :

And here's the IRS guidance ... just know that the dates from the IRS page reference the law as it was written: http://www.irs.gov/Individuals/The-Mortgage-Forgiveness-Debt-Relief-Act-and-Debt-Cancellation- but, was, again, extended through 2013 ... AS long as the forgiveness (whatever form it takes, short sale, settlement, etc.) is on your primary residence

NPVAdvisor :

Sorry, yes as you see above, what this turns on is (1) Primary residence and (2) forgiveness of debt

NPVAdvisor :

See this from IRS:

NPVAdvisor :

The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.

Customer:

Will they still send the IRS a 1099-c?

NPVAdvisor :

yes, you'll use Form 982 along with the return to document

NPVAdvisor :

Here's an excellent article on that piece of things: http://taxes.about.com/od/income/ss/mortgage_cancel_7.htm

Customer:

So, I'm assuming that as long as we do this before the end of the year, we will not have to pay any tax. Correct?

NPVAdvisor :

That's correct, extension was through 2013

NPVAdvisor :

you'll file the 982 with your 2013 taxes due by Apr 2014

Customer:

ok, I think that answers my questions. Thank you so much. You have been very helpful.

NPVAdvisor :

If this HAS helped, Id appreciate a rating of 3(ok) or better... that's the only way I'll be paid here ... HOWEVER, if you need more on this, come back here, so you won't be charged for another question ... Also, after you rate, the links to the forms and articles will be here as long as you need them

NPVAdvisor :

thanks

NPVAdvisor :

Lane

Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 14,672
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified
Lane and 87 other Tax Specialists are ready to help you
Ask your own question now

Thanks Marcia,

let me know if you need more here.

Positive feedback appreciated

Lane
Ask Your Own Tax Question
Thanks so much
Ask Your Own Tax Question
Was this answer helpful?

How JustAnswer works

step-image
Describe your issueThe assistant will guide you
step-image
Chat 1:1 with a tax professionalLicensed Experts are available 24/7
step-image
100% satisfaction guaranteeGet all the answers you need
Ask Lane Your Own Question
Lane
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 14,672
14,672 Satisfied Customers
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986

Lane 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

1,338 satisfied customers

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

Richard

Richard

Tax Attorney

4,512 satisfied customers

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

PhillipsEsq.

PhillipsEsq.

Attorney-at-Law

59 satisfied customers

B.A., M.B.A, J.D.

Robin D.

Robin D.

Senior Tax Advisor 4

15,569 satisfied customers

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

Megan C

Megan C

Certified Public Accountant (CPA)

8,655 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.

< Previous | Next >

Related Tax Questions
We are filling out a form 982. My wifes home was purchased
We are filling out a form 982. My wifes home was purchased for 160000 and she had a second for 80000. She foreclosed and the 1st took the home to auction. The second has been trying to collect but has… read more
Lev
Lev
Retired
Bachelor\u0027s Degree Equivalent
27,134 satisfied customers
property I owned went through foreclosure as I went through
property I owned went through foreclosure as I went through Chapter 11 Bankruptcy, now the bank that had a Home Equity Line of Credit is offering to forgive my debt. If I accept do I owe taxes on the … read more
Lane
Lane
JD, CFP, MBA, CRPS
Doctoral Degree
14,672 satisfied customers
Will our 2013 Discharged C7 bankruptcy exempt us from a 2014
Will our 2013 Discharged C7 bankruptcy exempt us from a 2014 1099 which would result from a $50K write-off by the owner of the 2nd? We just received an offer from an investor/realtor to buy our underw… read more
Lane
Lane
JD, CFP, MBA, CRPS
Doctoral Degree
14,672 satisfied customers
I am in Los Angeles, California. I am currently working
I am in Los Angeles, California. I am currently working on a loan modification. I understand that if I do a short sale my principal residence or a deed in lieu I will have debt forgiveness on deficien… read more
Lev
Lev
Retired
Bachelor\u0027s Degree Equivalent
27,134 satisfied customers
Wells Fargo has a second (LOC) on my home. After a year and
Wells Fargo has a second (LOC) on my home. After a year and a half to extend a modification WF declined the modification and although I was (and continue to make monthly payments thru the recovery dep… read more
Megan C
Megan C
Certified Public Accountant (CPA)
Master's Degree
8,655 satisfied customers
I am Realtor and because of economic difficulties in recent
I am Realtor and because of economic difficulties in recent years, many people I know have had to short sell their homes. In some instances, the short sale included both a purchase money first mortgag… read more
Phillip Bell, EA
Phillip Bell, EA
Tax Advisor
Bachelor's Degree
191 satisfied customers
The lender has conceded that there is a defective mortgage
The lender has conceded that there is a defective mortgage on this secured property. However, they placed a junior lien on it and invited me to make an offer for them to remove the junior lien (in ord… read more
Lev
Lev
Retired
Bachelor\u0027s Degree Equivalent
27,134 satisfied customers
Background: I asked my lender to accept a Deed in Lieu of
Background: I asked my lender to accept a Deed in Lieu of Foreclosure for an investment/rental property (condo-tenant occupied). Here is some background info: Original Purchase $215,000 in June 2005 (… read more
Lev
Lev
Retired
Bachelor\u0027s Degree Equivalent
27,134 satisfied customers
I owned a home in Az. Purchased in May 2004. We lived in it
I owned a home in Az. Purchased in May 2004. We lived in it until August 2008 then had to relocate to another state due to job loss in Az. We rented the home August 2008 until Oct 2010, the renters mo… read more
FiveStarLaw
FiveStarLaw
Attorney
Doctoral Degree
477 satisfied customers
If a bank is taking a reduced mortgage payoff as part of a
If a bank is taking a reduced mortgage payoff "as part of a litigation negotiations" are they required to report the reducted portion to the IRS by way of a 1099-C?… read more
Charles Greiner
Charles Greiner
Owner
Bachelor's Degree
2,436 satisfied customers
Bought a second home for my parents to live in since they didnt
Bought a second home for my parents to live in since they didn't have the credit to get a loan. House foreclosed on 12/2010; principle balance was $100K; heloc was $50k. Both of these loans were from … read more
Lev
Lev
Retired
Bachelor\u0027s Degree Equivalent
27,134 satisfied customers
I received a form 1099-C cancellation of debt We purchased
I received a form 1099-C "cancellation of debt" We purchased a house in AZ 8 years ago an refinanced it 2 years ago. We originally purchased the house for $204,000 and refinanced it for $360,000. (We … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
15,569 satisfied customers
If I am doing a short sale on my primary residence and I did
If I am doing a short sale on my primary residence and I did an 80/20 loan to buy the house. So I have a first and a second mortage on the home. I know I will be 1099 the difference for both loans and… read more
Anne_C
Anne_C
Attorney
Doctoral Degree
13 satisfied customers
I am in the middle of a short sale and want to know if the
I am in the middle of a short sale and want to know if the mortgage debt relief act applies in the case for debt forgiveness. I also wanted to know generally what the fed and CA state tax implications… read more
Marvin,EA
Marvin,EA
Enrolled Agent
Bachelor's Degree
1,605 satisfied customers
A 1099 A was issued principal balance owed $416,066 FMV $408,983
A 1099 A was issued principal balance owed $416,066 FMV $408,983 Personally liable, no 1099 c issued. Do you have to report difference at this time as COD.… read more
Anne_C
Anne_C
Attorney
Doctoral Degree
13 satisfied customers
I bought my house for 250k. I cashed out about 150k from my
I bought my house for 250k. I cashed out about 150k from my house. I used about 100k for home improvement and paid about 15k for refinancing costs. Now I am selling my house for less than what i bough… read more
Lev
Lev
Retired
Bachelor\u0027s Degree Equivalent
27,134 satisfied customers
We live in AZ and just recently purchased a second house which
We live in AZ and just recently purchased a second house which will be our primary residence. We have been trying to rent out our 1st home but are having a hard time finding someone that will pay what… read more
Merlo
Merlo
Tax Consultant
558 satisfied customers
I am trying to purchase a home from my sister for $175,000.
I am trying to purchase a home from my sister for $175,000. The home has been appraised at $360,000. I had a chapter 13 that has been discharged for about 14 months and I am wondering if there is a mo… read more
Ed Johnson
Ed Johnson
Senior HR Consultant and Business Devlpm
Bachelor's Degree
6,994 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