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Taxes and a mortgage mess this year
Hi,
About three years ago we refinance our home, and took some cash out to pay bills mainly student loans. Sounded like a good deal at that time, well it was one of those inflating rates.. we tried to refinance and found out that we owed allot more then the place was worth. We talked to a realtor and he advise that the way over inflated the value of condo. We hired on attorney and discovered they forged the value and our income. He gave them the opportunity to refinance our home at today's value or else court time, plus but the interest charges towards the equity of the home. The mortgage company did that with out any question, they told us they will "eat the difference" this was about 56k they "ate". There was no discussion of tax during this. Will we get at W-2 for this, how ugly will it be during tax time. The lawyer fee was 5k for this. We live in Ca. additionally know some one talked about being insolvent at the time. Right before our assets was about 197,000, including furniture, cars, savings/retirement, and other misc stuff. Our debts were about 220k before this. How would someone claim this difference. thanks for you |
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You cannot claim the insolvency on your taxes.
You MAY get a Form 1099-C from the mortgage company. If so, go back to the mortgage company and have them revoke it, because, In my opinion, the resultant difference in the interest charges ($56K) was a result of THEIR malfeasance. For this reason, you should not be held responsible for the taxes. However, if the IRS gets a Form 1099-C, they will not look at it that way. I would be pro-active on this and contact the lawyer to have him work on your behalf in this issue. |
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There are some exceptions to paying some taxes on cancellation of debt if you are insolvent. The IRS has been trying to work out some tax relief for taxpayers who have had their home forclosed or have been caught up in this mortgage fiasco. It's complicated though and would probably be best handled by a tax professional.
Questions and Answers on Home Foreclosure and Debt Cancellation |
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Agreed!
But I stand by my original post. The mortgage company is trying to avoid both criminal and civil penalties by settling with you, so if you contact the company NOW and stop the Form 1099-C from being issued, you can prevent the problem before it happens. |
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