Cancellation of Debt
Get Legal Help Today
Secured with SHA-256 Encryption
Cancellation of Debt
I was the victim of a broker/appraiser scam in Florida. The home that I was stuck with was never my primary residence. I defaulted and the property has been foreclosed. Is the mortgage/note recourse or non-recourse debt? According to the IRS website, non-recourse debt which has been cancelled is NOT income. I do not have any judgment or liability beyond the foreclosure. The debt cancelled was about 260,000 and the FMV of the property was 112,000.
Asked on June 4, 2009 under Real Estate Law, Florida
B. B., Member, New Jersey Bar / FreeAdvice Contributing Attorney
Answered 12 years ago | Contributor
The tax code -- and the IRS regulations based on the code -- are not for the faint of heart, even among lawyers. A question like this can't be answered reliably, without professional review of all the facts. You're looking at a possible net "gain" of nearly $150,000, and the taxes on that are what's at stake here.
And, of course, there are penalties and interest on the taxes, if the IRS comes for them after the return is filed. You need to have the full consultation, with a CPA or a tax lawyer. One place to find qualified attorneys is our website, http://attorneypages.com
IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.