The reason I said $80k is that my friend owes approximately $180K on the motor home and the fair market value (according to NADA) is between $100k and $120k. So assuming those numbers are true, wouldn't there be an $60K - $80K 1099-c issued?
For a primary residence I believe the Mortgage Forgiveness Debt Relief Act would give you the ability to discharge the tax liability. But for non-primary residences there really should be some type of hardship consideration available.
The Act provides tax relief for Primary Residence only. Under the IRS code, however, your friend will be able to write off 1099C income to the extent that she is insolvent. Her hardship will have to be proven by insolvency. Her accountant will need to help her with this.
Your friend may have to pay taxes on the lenders canceled debt. The canceled debt of a deed-in-lieu should be the amount owed less the appraised value. With a short sale it should be the total due less the lenders net from the sale. If your friend shows any insolvency (greater liabilities than assets) she should be able to write off an amount of 1099C income proportional to the insolvency. Her accountant can definitely help her.
A friend of mine has a Class-A motor home that she is not able to keep up with the payments. By my best estimates, the motor home has $80,000 in negative equity. If she gets rid of the motor home via a deed in lieu or short sale, how can she avoid paying taxes on that $80,000 debt forgiveness? Will she have to come up with $25,000 (25% tax bracket on $80,000 forgiveness) all at once (i.e. April 15th 2011)? Should she get with a CPA now to try and prove insolvency? Thanks, Bruce
The reason I said $80k is that my friend owes approximately $180K on the motor home and the fair market value (according to NADA) is between $100k and $120k. So assuming those numbers are true, wouldn't there be an $60K - $80K 1099-c issued?
For a primary residence I believe the Mortgage Forgiveness Debt Relief Act would give you the ability to discharge the tax liability. But for non-primary residences there really should be some type of hardship consideration available.
AbodeRES 1 year ago
Hi Bruce,
The Act provides tax relief for Primary Residence only. Under the IRS code, however, your friend will be able to write off 1099C income to the extent that she is insolvent. Her hardship will have to be proven by insolvency. Her accountant will need to help her with this.
Peter
MHSolutionsInc 1 year ago
Your friend may have to pay taxes on the lenders canceled debt. The canceled debt of a deed-in-lieu should be the amount owed less the appraised value. With a short sale it should be the total due less the lenders net from the sale. If your friend shows any insolvency (greater liabilities than assets) she should be able to write off an amount of 1099C income proportional to the insolvency. Her accountant can definitely help her.
Thanks,
Peter
MHSolutionsInc 1 year ago
A friend of mine has a Class-A motor home that she is not able to keep up with the payments. By my best estimates, the motor home has $80,000 in negative equity. If she gets rid of the motor home via a deed in lieu or short sale, how can she avoid paying taxes on that $80,000 debt forgiveness? Will she have to come up with $25,000 (25% tax bracket on $80,000 forgiveness) all at once (i.e. April 15th 2011)? Should she get with a CPA now to try and prove insolvency? Thanks, Bruce
AbodeRES 1 year ago