In June, two of my investment condos went into foreclosure. The neighborhood went down... broken windows throughout the condo community, some condos burned in the inside... The amount on the loans were $110,000 for one of the condos, and $114,000 for the other condo. I also had an investment home that just foreclosed on the 7th of AUG. Tried to short sale, but the bank did not accept the offer. This property had a 1st and 2nd mortgage. The first mortgage, I owed $124,000. The second mortgage, I owed $32,000. In the foreclosure sale, the bank purchased the house back for $119,000 as a third party. The condos never sold. Just foreclosed I think.. This has been a bad investment year for me.

When I spoke back to the bank for the house, they said that they were going to issue a form 1099-C for $124,000. The banks for the condos did not tell me whether they were going to issue a 1099 or not.

Will I have to pay taxes on all of these foreclosures? If this amounts to a tax bill at the end of the year that amounts to thousands of dollars (60K, - 90K or more), will I have to pay this? Can I lose my personal residence due to the foreclosures or the IRS? Will bankruptcy stop IRS collection of taxes? WHAT CAN I EXPECT NEXT AFTER ALL OF THESE FORECLOSURES?

Yes, the issue of the 1099 will cause you to owe 1000's in taxes.

And unless you had the condos under a LLC or a corporation, yes you can lose everything.

Bankruptcy will not normally stop IRS debts.

I did a quick deed and rolled the condos over to my LLC in 2005. However, the mortgage was still under my name. Would I still be responsible for the debt since I quick deed the condos to my LLC, and the mortgage still under my name?

No the debts are in your name, not in the LLC, so you will owe the money,
You needed to have the mortgage in the LLC name and no personal liability.

Also the quit claim deed may be invalid since the lien on the property would prohibit transfer without the permission of the lienholder or satisfaction of the lien. That's why the foreclosures can go through because the transfer of ownership may have been invalidated.

What the 1099s mean is that the banks are forgiving the balance of the loan after the foreclosure sale. The IRS counts this as a gift to you that is taxable as income.

I feel for you.. I'm in the same kind of mess! Do you have any idea how IRS will deal with people in our situation?

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Originally Posted by Millertyme

In June, two of my investment condos went into foreclosure. The neighborhood went down.... broken windows thoughout the condo community, some condos burned in the inside... The amount on the loans were $110,000 for one of the condos, and $114,000 for the other condo. I also had an investment home that just foreclosed on the 7th of AUG. Tried to short sale, but the bank did not accept the offer. This property had a 1st and 2nd mortgage. The first mortgage, I owed $124,000. The second mortgage, I owed $32,000. In the foreclosure sale, the bank purchased the house back for $119,000 as a third party. The condos never sold. Just foreclosed I think.. This has been a bad investment year for me.

When I spoke back to the bank for the house, they said that they were going to issue a form 1099-C for $124,000. The banks for the condos did not tell me whether they were going to issue a 1099 or not.

Will I have to pay taxes on all of these foreclosures? If this amounts to a tax bill at the end of the year that amounts to thousands of dollars (60K, - 90K or more), will I have to pay this? Can I lose my personal residence due to the foreclosures or the IRS? Will bankruptcy stop IRS collection of taxes? WHAT CAN I EXPECT NEXT AFTER ALL OF THESE FORECLOSURES?

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Why not check the insurance policy for a damage or deteriation of building clause you might get the insurance to pay the diff and that will clear you tax