Upside Down Mortgage

Posts Tagged ‘act’

Mortgage Forgiveness Relief Act Of 2007

Question: Countrywide Home Loans - Mortgage Forgiveness Debt Relief Act of 2007?

I am trying to complete my income taxes and I had a foreclosure in 2008. The Lender was Countrywide. I never received any paperwork from Countrywide stating the debt was forgiven. Does Countrywide report a 1099-C and why haven't I received a copy yet? Seeing as through Countrywide is the worse lender.... Does Countrywide even forgive the debt? The house is worth probably $50,000.00 and I owe then at least $125,000.00. That would mean I could be taxes on $75,000.00? Does the Mortgage Forgiveness Debt Relief Act 2007 discriminate against what type of loan, interest rate and income you had?

Answer: Insolvency: If you are insolvent when the debt is cancelled, some or all of the cancelled debt may not be taxable to you. You are insolvent when your total debts are more than the fair market value of your total assets.

This is taken from the IRS publication

Insolvency: If you are insolvent when the debt is cancelled, some or all of the cancelled debt may not be taxable to you. You are insolvent when your total debts are more than the fair market value of your total assets.

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

You need to consult your Tax Adviser for this because if you are insolvent then you may or maynot have to pay taxes. For example in Debt Settlement The debt forgiven may or may not be taxible depending on if you are insolvent.

The IRS considers $600 or more of forgiven debt as taxable income.[citation needed] The forgiving creditor must provide the taxpayer with a 1099-C tax form. This form will list the amount of forgiven debt and interest in Box 2. Taxpayers with portions of personal loans forgiven may not subtract the interest reported in Box 3 from the amount of reportable income on this form.

However, the IRS does not require taxpayers to report forgiven debt if the tax payer was insolvent at the time the creditor forgave the debt. Being insolvent means that the amount of a debtor’s debts are greater than his/her assets (how much money and property the debtor owns). However, the IRS adds that “you cannot exclude any amount of canceled debt that is more than the amount by which you are insolvent.”[8]

For example, if a taxpayer is $10,000 in debt and owns $3,000 in assets, he/she cannot exclude more than $7,000 of forgiven debt from his/her income tax. Any forgiven debt over $7,000 that year must be reported as taxable income.

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Mortgage Relief Act

Question: What is mortgage relief act? How will this effect a short sell on my house,I owe 160,000 house valued at?

57,000 because of foundation failure. We lived there 22 years,I had bad wreck cant work ever again,so we sold house for 60,000 Will we have to count difference on our IRS? I draw disability and I have know one to ask we cant afford 100,000 as income we are broke please help

Answer: You likely won't have to pay taxes on it. The IRS speaks directly to that issue here, the debt is forgiven:

http://www.irs.gov/newsroom/article/0,,id=174034,00.html

http://www.thhf.org/blog/2008/10/mortgage-forgiveness-debt-relief-act/

J. Williams (shadowstats.com): This is a Monetary Inflation