• The Entrepreneur Forum | Startups | Entrepreneurship | Starting a Business | Motivation | Success
  1. Join 50,000+ entrepreneurs
    who are kicking butt and
    winning their dream life.

    Unscripted™ Entrepreneurship:
    A Business That Pays More Than Money, It Pays Time.

    "Fastlane" is an entrepreneur discussion forum based on The Unscripted Entrepreneurial Framework (TUNEF) outlined in the two best-selling books by MJ DeMarco (The Millionaire Fastlane and UNSCRIPTED™). From multimillionaires to digital nomads, the forum features real entrepreneurs creating real businesses.

    Download (Unscripted) Download (Millionaire Fastlane)  Register
    Registering for the forum removes this block!

IRS Releases Rules for Forgiven Debt & Tax

Discussion in 'Asset Protection/Taxes/Legal' started by Diane Kennedy, Feb 16, 2008.

  1. Diane Kennedy
    Offline

    Diane Kennedy Bronze Contributor

    Messages:
    795
    Likes Received:
    209
    Joined:
    Aug 31, 2007
    Rep Bank:
    $134
    Homeowners who had mortgage debt partly or entirely foregiven (restructuring, short sale or foreclosure) on their principal residence during 2007 may be able to claim special tax relief.

    Instructions: Fill out Form 982 and attach to 2007 federal income tax return. Most people only have to fill out lines 1e, 2 and 10b.

    NOTE: Most software packages do NOT have this form since the regulations just came out (2/12/08)

    Some of the rules:

    - Loan balance must be less than $2 mill. ($1 mil for married filing separately.)
    - Law is in effect for 2007, 2008 and 2009.
    - The debt must have been used to buy, build or substantially improve the taxpayer's principal residence and must have been secured by that residence.
    - Debt used to refinance qualifying debt is also eligible for the exclusion, but only up to the amount of the old mortgage principal, just before the refinancing.
    - Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the new tax-relief provision.
    - Borrowers whose debt is reduced or eliminated receive a year-end statement (Form 1099-C) from their lender.
    - For debt cancelled in 2007, the lender was required to provide this form to the borrower by Jan. 31, 2008. By law, this form must show the amount of debt forgiven and the fair market value of any property given up through foreclosure.
     
    tbsells likes this.
  2. tbsells
    Offline

    tbsells Contributor

    Messages:
    304
    Likes Received:
    57
    Joined:
    Jul 27, 2007
    Location:
    Ohio
    Rep Bank:
    $56
    Thanks Diane! This info is very helpful. I will pass it on to my short sale clients from last year. Rep+
     
  3. Diane Kennedy
    Offline

    Diane Kennedy Bronze Contributor

    Messages:
    795
    Likes Received:
    209
    Joined:
    Aug 31, 2007
    Rep Bank:
    $134
    Thanks for the rep. I think this could be an advantage if you're involved in picking up pre-foreclosure properties. If you can ease their mind about tax consequences, that would be a decided advantage.
     
    RAiMA likes this.
  4. tbsells
    Offline

    tbsells Contributor

    Messages:
    304
    Likes Received:
    57
    Joined:
    Jul 27, 2007
    Location:
    Ohio
    Rep Bank:
    $56
    It's certainly an advantage if you are selling real estate in Ohio, which I am. It will also help in buying preforeclosures. I've had clients represented by attorneys who advised them to declare bankruptcy instead of selling the property and facing the possible tax consequences. I've always thought it was bad abvice. It seems to come from attorneys who specialize in.......bankruptcy. :nonod:
     
  5. Diane Kennedy
    Offline

    Diane Kennedy Bronze Contributor

    Messages:
    795
    Likes Received:
    209
    Joined:
    Aug 31, 2007
    Rep Bank:
    $134
    I HATE it when advisors give bad advice out of blatant self-interest.

    My initial post was regarding principal residence. BUT you can also escape the tax consequence if you are "insolvent". You do NOT have to declare bankruptcy to be considered insolvent.
     

Join 1000s of entrepreneurs who are rewriting life's script and winning financial freedom.

---- ----

You must be a member to join the conversation.

Create Account

Join the community fast and easy!

REGISTER

Log In

Already have an account? Login here.

LOG IN

Share This Page