Learn more about debt relief facts with these Frequently Asked Questions about liability forgiveness on a foreclosed property.
Understanding these details is crucial for individuals facing financial challenges and seeking viable solutions to alleviate their burdens on their income tax filing.
By being informed about forgiveness options, individuals can make informed decisions about their financial well-being. Here are some important liability reduction details to know:
Remember, each individual's financial situation is unique, and what works for one person may not be suitable for another. It's crucial to assess personal circumstances, seek professional advice, and fully understand the implications of debt relief options before making any decisions.
Being well-informed about debt relief facts empowers individuals to make choices that align with their financial goals and lead to long-term financial well-being. By understanding the available options, seeking assistance when needed, and taking proactive steps towards debt management, individuals can regain control of their finances and work towards a debt-free future.
Question: How do I know whether or not title has transferred on a foreclosed property?
Answer: In order to find out whether or not the title has transferred on a foreclosed property, you should simply check in with the local title company or call the lender.
Question: If a buyer gets two mortgages at the time of a purchase, are they both acquisition debt AND both nonrecourse?
Answer: If a buyer gets two mortgages at the time of the purchase they are both acquisition debt, however, the second trust deed may be recourse by the terms of the deed of trust. The first is not by operation of law.
Question: In a judicial foreclosure, how long does the lender have to hold the property before sale?
Answer: In a judicial foreclosure, the lender has one year to hold the property.
Question: Are rental property mortgages recourse?
Answer: Yes rental property mortgages are considered to be recourse loans.
Question: Can you use the new rules for qualifying residence debt exclusion and insolvency for nonqualifying debt?
Answer: Yes. You can use the exclusion for qualifying debt and the insolvency exception for the nonqualifying discharged debt per Publication 4681. However, if the qualifying residence debt exceeds $2,000,000.00, you cannot exclude the excess under the insolvency exception. This can change and should be reviewed on a year by year basis.
Question: If I have multiple foreclosures, do I compute insolvency for each one?
Answer: Yes. If you have multiple foreclosures, you are allowed the exclusion only to the extent of insolvency at the time of each debt cancellation.
Question: If a taxpayer does not receive a 1099-C, is COD still income?
Answer: Yes the COD is still income even if a 1099-C is not received. Many taxpayers do not get the forms because they move or fail to notify the lender of their current address.
Question: Where do I report COD income from a rental or business foreclosure?
Answer: Nonbusiness COD income should be reported on Form 1040, line 21 (Other Income), rental COD income goes on Schedule E and business COD income is reported on Schedule C.