Tax experts....Need insight! Gov taxing me on Foreclosed home.

I'm dealing with this,, Never wanted to default on this previous house, It took me 33 years to get where I wanted in owning, selling the properties that I had. Now as a result of the Lending firm sending me a tax form indicating they have forgiven this debt, It's required base on this form I must submit the the information/form as a part of the Tax return for this 2012 year return. Now considering the amount when figured in this as the Tax rules so to speak... I must pay taxes on that amount.
$179.00 for this forgiven debt, $40.000 for tax on that amount thats due to IRS regardless. (That amount based on the amount of time to pay off Morgage they would of received over the time frame of the loan)
I tried to work anyway I could with that company to keep that house.. no way.

Strange how that is... Consiidering the PTB decided to bail out these corrupt practices, we are paying on that over all.
Getting screwed again I am. I feel like I'm bailing out the Gov because they bailed out the main cause of this.

I was told that in order for the Loan to be revised, I need to be in default in order to adjust the payment/interest on loan. I was not in the rears upon this information, but played the game of going that direction. After doing so, they would not agree ona revised Morgage.

Maybe you see my point, however any experts here that can suggest the in's-out's of this.

Damn..........

reply to post by jessemole


The IRS considers forgiven debt as income, I dont' understand why they do this totally it has something to do with you would have paid it out but, since you didn't have to, it was income that you had to use for other things, it's really stupid, but that's the IRS for you.. REALLY DUMB..

too bad you are not a mexican [illegals]

they love mexicans [illegals]

reply to post by vkey08


Thanks Vkey08 for your input.

Feeling like it's death by taxes after 58 years on the rock.. Never going to realize the amount I've put into this system.

What recourse do we have?

Slave away until until death do us part(Gov) Somewhat as a well laiid out plan but not in my favor or anyones.

My next step.. Lawyer in Tax cases?
More money that I have little of.
Homeless looking good at this point, those that choose to do so, I undrerstand why.

Meanwhile I will stay in my 30 year old Trailer home until otherwise noted.
So much for the Amercan dream.

Jesse

Agreed. Any forgiven debt, whether from a mortgage or credit card debt, is considered income to the IRS. I was caught by this little surprise in the past. One of those things they don't tell you when you are settling your debt issues at the time.

They can't get blood from a turnip. Consult a pro and negotiate that debt for pennies on the dollar. But yes, forgiven debt gets you a Form 1099 for the amount. You reneged on the debt, and that amounts to income. But look at it this way, if you'd borrowed from the Mafia instead of a bank, you'd be dead now.

I apologize in advance, but it has to be said. You took out the mortgage promising to pay and you did not. Once you pull the trigger for Foreclosure Hell anything can happen, but it was you who pulled the trigger in the first place, trying to manipulate your way out of your bad situation. I'm sure you got caught in the downturn, but so did everyone else and everyone else is not in foreclosure. Who knows what you did to make it turn out this way, but those people whom I have personal knowledge of, including my own son, got in their situations because they over-extended themselves. It's not rocket science to figure out what happened to them.

They did some really weird stuff, too. My son got caught up in the ever-rising market, so he had this perfectly reasonable house in a nice neighborhood that had risen in value so he had over $100K equity in it. But he wanted to live on "the lake" because he had a friend who lived on "the lake" and it was really cool. So here's what he did. He re-mortgaged his house for its full worth, took that $100K cash as a down payment on a $900K house on "the lake." House payments were incredible, but he had a great job in commercial construction, so what the hey? He rented out the old house for less than its new mortgage payment. I don't see how he qualified for such a large loan, and here's where I would fault the bank for giving it to him, but he instigated this whole scheme in the first place and it is his responsibility.

It gets better. Real estate was still going up, so suddenly his $900K house was worth $1.1 million. So he re-finances the lake house and takes the $200K in cash to buy a fancy speedboat and remodel the kitchen in granite. Then a few things happen. First the septic tank failed so they had to move to a rental. Then we had a cold winter and a pipe burst and flooded the house. As it warmed back up Black Mold grew everywhere so the house had to be gutted and re-done. That's when they found out how poorly the house was constructed. The electrical was done wrong and not to code.

Then the real estate market tanked and his house became worth, on paper, about $500K, though he could never sell it for that because of the shape it is in. There's a little more to the story, but the bottom line is that he is now in Foreclosure Hell. As usual, people in this situation try to find someone else to blame and the Evil Bank is right there to take the hit EVEN THOUGH the bank loaned out a million bucks and now has a $500K house (cough) to show for it. The bank is out $500K and we blame the bank????

So they completely abandoned the house. They stopped making payments on it altogether. I notice the taxes are paid, and I don't know who did that. The bank is stalling on foreclosing; they don't really want to, and the story gets a little murky here. I believe they did NOT ask for a restructuring, and that may have allowed them to avoid the dreaded Form 1099. It's been several years and they are still in the midst of this mess.

The American Dream is very much alive for people who do not over-extend themselves, who manage their finances in a responsible manner and pay what they owe. It doesn't work particularly well for people who crave a 4 car garage when they can afford a 2 car garage, people who manipulate their mortgage to get goodies instead of concentrate on being completely debt-free as soon as possible.

My son ought to have paid off his first house and foregone the speedboat and the lake until he could really afford them. With real estate prices low, now would have been a good time, but he jumped the gun. Of course, my son is very much smarter than I am and doesn't think old Dad knows what he is talking about. After all, he's the one with the good job that pays more than I ever made. Well, it did until he got fired, anyway. Ironically, it's my money that will ultimately bail him out in a few years when I'm gone. I'm the one who has no house on the lake and no speedboat, but I also have no mortgage, no debt, and a substantial inheritance to leave him. I'm betting when he sees the cash his eyes are going to light up and we'll have another rounds of this.

Oh, and his friend lost his house on the lake, too.

reply to post by schuyler


"Want Less" is a good motto for him to think about adopting. Sorry for his troubles, hope he learns from them.

reply to post by schuyler


Hey schuyler.. thanks for your well reply, yes I know this. But it seems tax..tax.
I know I have to deal with this, but Man there is the element of not being a fault.
I can only trust I can agrue the amount having to be paid. Thanks for your insight!

Your Son is lucky .. he has an nest egg that you can provide for him..Rather he know's it or not.
Strange how that is.. he will only realize what you may of mention to him, what the best way to go in his thoughts. and get your insight. Not taken heed to those words in most cases if ignored proves costly.
Monies not save for previous insight.. Some listen some do not.

But again for me I did everthing I could to secure what I had.. No wiggle room on their behalf.

Thanks!!
Jesse