Capital Gains Tax from Foreclosure

[seattle-relo]

I was wondering if anyone of you know how the capital gains tax after foreclosure for a nonrecourse loan on a personal residence works? I had heard about it from a client and tried to get more information about it. I guess if you don’t have a recourse loan you aren’t 1099ed, but you might have to pay capital gains tax. I was looking at the IRS site and then at some examples and got confused about how it is calculated. Does anyone understand it? I saw different examples and they were contradicting themselves. Most of my confusion was how the examples got the adjusted basis which then is subtracted from the loan balance to determine a gain or loss. Does anyone understand how to calculate the adjusted basis on a primary residence (because the examples were using deprechiation or casualty loss and I thought that only applied to an income property)
Thanks

[patientlywaiting]

It’s quite possible depending on the situation.

If you bought an investment house in 2000 for $200,000 and the value tripled to $600,000. During the peak your refied that house and invested in several other properties. The market crashes and some of your properties go into foreclosure. If you let your 2000 house foreclose, you may owe capital gains taxes, even if your cash was lost in bad investments.

[patientlywaiting]

It’s quite possible depending on the situation.

If you bought an investment house in 2000 for $200,000 and the value tripled to $600,000. During the peak your refied that house and invested in several other properties. The market crashes and some of your properties go into foreclosure. If you let your 2000 house foreclose, you may owe capital gains taxes, even if your cash was lost in bad investments.

[patientlywaiting]

It’s quite possible depending on the situation.

If you bought an investment house in 2000 for $200,000 and the value tripled to $600,000. During the peak your refied that house and invested in several other properties. The market crashes and some of your properties go into foreclosure. If you let your 2000 house foreclose, you may owe capital gains taxes, even if your cash was lost in bad investments.

[patientlywaiting]

It’s quite possible depending on the situation.

If you bought an investment house in 2000 for $200,000 and the value tripled to $600,000. During the peak your refied that house and invested in several other properties. The market crashes and some of your properties go into foreclosure. If you let your 2000 house foreclose, you may owe capital gains taxes, even if your cash was lost in bad investments.

[seattle-relo]

What if it is your primary residence. Say you bought it in 2006 for 650K and owe 620K, market value is now 600 and you didn’t refinace. Would that be a loss? (I don’t believe you get credit for a loss)

[seattle-relo]

What if it is your primary residence. Say you bought it in 2006 for 650K and owe 620K, market value is now 600 and you didn’t refinace. Would that be a loss? (I don’t believe you get credit for a loss)

[seattle-relo]

What if it is your primary residence. Say you bought it in 2006 for 650K and owe 620K, market value is now 600 and you didn’t refinace. Would that be a loss? (I don’t believe you get credit for a loss)

[seattle-relo]

What if it is your primary residence. Say you bought it in 2006 for 650K and owe 620K, market value is now 600 and you didn’t refinace. Would that be a loss? (I don’t believe you get credit for a loss)

[SD Realtor]

seattle-relo sorry to cop out on you but I would consult a CPA. I think I know the answer but it is to speculative and I do not want to give bad guidance.

SD Realtor

[SD Realtor]

seattle-relo sorry to cop out on you but I would consult a CPA. I think I know the answer but it is to speculative and I do not want to give bad guidance.

SD Realtor

[SD Realtor]

seattle-relo sorry to cop out on you but I would consult a CPA. I think I know the answer but it is to speculative and I do not want to give bad guidance.

SD Realtor

[SD Realtor]

seattle-relo sorry to cop out on you but I would consult a CPA. I think I know the answer but it is to speculative and I do not want to give bad guidance.

SD Realtor

[kev374]

I know for a fact that if you didn’t refinance the original loan then it is non-recourse. There cannot be a deficiency judgement against you and nor can there be any tax liabilities. Of course as always double-check with a CPA as sdr said.

If you refinanced however, there are huge problems including possible deficiency judgements and/or IRS tax liability. I asked another question about this whether it only applies to cash-out or not.

I would imagine definciency judgements are much better because you know how the IRS is about money owed to them 🙂 From what I’ve read many lenders will discharge the loss and issue 1099 resulting in huge tax liability for the borrower.

I think there was a bill in congress to change this legislation but not sure what is the state of that.

[kev374]

I know for a fact that if you didn’t refinance the original loan then it is non-recourse. There cannot be a deficiency judgement against you and nor can there be any tax liabilities. Of course as always double-check with a CPA as sdr said.

If you refinanced however, there are huge problems including possible deficiency judgements and/or IRS tax liability. I asked another question about this whether it only applies to cash-out or not.

I would imagine definciency judgements are much better because you know how the IRS is about money owed to them 🙂 From what I’ve read many lenders will discharge the loss and issue 1099 resulting in huge tax liability for the borrower.

I think there was a bill in congress to change this legislation but not sure what is the state of that.

[Author]

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