I'm in the process of a short sale here in Cal. The loan was for 575,000. selling for 159,000. What can i do to minimize the tax impact on my next year's filing? I make around 45,xxx a year,wife,2 kids.
How to minimize 1099 filing..............
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You can actually borrow 575K when you only make 45K?
JHZR2
Staff member
lol, seriously.
C'mon guys Alot of people situations have changed in the past few years.
+1 on getting professional advice on this one.
But I don't see why you would have a taxable gain if the selling price of $159K is less than the tax basis of the house. In other words crudely, if you sell for a lot less than you paid for it, you'll have a loss. You'll still have the loan to satisfy.
But I don't see why you would have a taxable gain if the selling price of $159K is less than the tax basis of the house. In other words crudely, if you sell for a lot less than you paid for it, you'll have a loss. You'll still have the loan to satisfy.
JHZR2
Staff member
Originally Posted By: DieselTech
C'mon guys Alot of people situations have changed in the past few years.
This is true but there is something seriously wrong with a property once worth that much selling for so little.
C'mon guys Alot of people situations have changed in the past few years.
This is true but there is something seriously wrong with a property once worth that much selling for so little.
Originally Posted By: JHZR2
Originally Posted By: DieselTech
C'mon guys Alot of people situations have changed in the past few years.
This is true but there is something seriously wrong with a property once worth that much selling for so little.
It's called a 'bubble'.
I had a co-worker (a few years ago) tell me "real estate prices will never go down because people will always need a place to live". I said "real estate will go down when salaries can no longer afford the ridiculous prices".
Giving mortgages to people who couldn't afford to pay for them was wrong even if the goverment 'required' it. We're all paying for it now.
Originally Posted By: DieselTech
C'mon guys Alot of people situations have changed in the past few years.
This is true but there is something seriously wrong with a property once worth that much selling for so little.
It's called a 'bubble'.
I had a co-worker (a few years ago) tell me "real estate prices will never go down because people will always need a place to live". I said "real estate will go down when salaries can no longer afford the ridiculous prices".
Giving mortgages to people who couldn't afford to pay for them was wrong even if the goverment 'required' it. We're all paying for it now.
it's short selling for that. That doesnt mean it's the property worth. Alot of time SS's need repairs or appliances and such. My buddy got in a bad way and had to short sell his 350k home for 139k. Short sell is much better on your credit then losing the home all together.
With all of the short sells out west right now it's the time to buy and hold for a little while. You'll mnake pretty large gains on it as the market comes back. AZ,NV, and CA are short sell central right now and property values are really high when the market turns. Imagine that 500k property you buy for 150k. Sink at most 50k back into the property......Nice return, but it wont be a 2 month flip for that return right now.
Junk homes in the ghetto go for more then 200k in CA
With all of the short sells out west right now it's the time to buy and hold for a little while. You'll mnake pretty large gains on it as the market comes back. AZ,NV, and CA are short sell central right now and property values are really high when the market turns. Imagine that 500k property you buy for 150k. Sink at most 50k back into the property......Nice return, but it wont be a 2 month flip for that return right now.
Junk homes in the ghetto go for more then 200k in CA
Maybe you can ask Drew for some advice since he is an accountant
The place is a duplex,5 years old. No repairs are needed.Selling because i no longer can afford the payment.The most it might need is carpet.5 years old as in from the foundation up.Where is Drew?
I think he is from the Colorado area and he is a long time member of BITOG.
Originally Posted By: SWSportsman
You can actually borrow 575K when you only make 45K?
"you're approved,since your credit score is 660" That was the catch.
You can actually borrow 575K when you only make 45K?
"you're approved,since your credit score is 660" That was the catch.
http://www.realestateinvestingtax.com/shortsale.shtml
I'm not up on CA state tax law, but for federal taxes, it all depends on your tax basis what the property sells for. You could end up with a taxable gain and still owe the balance on the loan. Because it's a rental, I believe you could write off a taxable loss from a short sale. With rentals, you deal with a very complicated concept of passive losses and income which needs to be addressed with the specifics of your property, and whether any debts from the short sale were canceled (which would be taxable income).
I'm not up on CA state tax law, but for federal taxes, it all depends on your tax basis what the property sells for. You could end up with a taxable gain and still owe the balance on the loan. Because it's a rental, I believe you could write off a taxable loss from a short sale. With rentals, you deal with a very complicated concept of passive losses and income which needs to be addressed with the specifics of your property, and whether any debts from the short sale were canceled (which would be taxable income).
Originally Posted By: Vikas
What happens to the unpaid balance of the loan? Does bank forgive that part? Am I asking too many questions?
Unless you file bankruptcy (which has numerous downsides, clearly), the bank doesn't "forgive" your loans typically.
What happens to the unpaid balance of the loan? Does bank forgive that part? Am I asking too many questions?
Unless you file bankruptcy (which has numerous downsides, clearly), the bank doesn't "forgive" your loans typically.
Originally Posted By: JHZR2
Originally Posted By: DieselTech
C'mon guys Alot of people situations have changed in the past few years.
This is true but there is something seriously wrong with a property once worth that much selling for so little.
There are some areas around here that overbuilt so badly, you can buy new commercial and residential properties for less than the replacement cost of the improvements.
It's really basic supply and demand. Reckless builders and bankers built supply faster than the absorption rate of the local economy. The result is predictable.
It's great for people that know basic business cycles and can bide their time; a disaster for people that think things will always go up, or that they can get in and get out before it all goes bust.
Last time I was in LA, the local real estate prices were so high for so little, I couldn't understand how (or why) people could even live there.
Originally Posted By: DieselTech
C'mon guys Alot of people situations have changed in the past few years.
This is true but there is something seriously wrong with a property once worth that much selling for so little.
There are some areas around here that overbuilt so badly, you can buy new commercial and residential properties for less than the replacement cost of the improvements.
It's really basic supply and demand. Reckless builders and bankers built supply faster than the absorption rate of the local economy. The result is predictable.
It's great for people that know basic business cycles and can bide their time; a disaster for people that think things will always go up, or that they can get in and get out before it all goes bust.
Last time I was in LA, the local real estate prices were so high for so little, I couldn't understand how (or why) people could even live there.
Originally Posted By: Vikas
What happens to the unpaid balance of the loan? Does bank forgive that part? Am I asking too many questions?
1099 forms are used to report income to the IRS, so the obvious concern here is that the forgiven part (if any) of the loan will become income taxable to the former borrower.
A bad situation, but until tax rates hit 100%, it's still way better than repaying a loan when you no longer own the property.
I'm not an accountant, but generally, cancellation or forgiveness of a debt is income to the person receiving the benefit of the forgiveness or cancellation. Our OP really needs to have an office conference with an accountant.
What happens to the unpaid balance of the loan? Does bank forgive that part? Am I asking too many questions?
1099 forms are used to report income to the IRS, so the obvious concern here is that the forgiven part (if any) of the loan will become income taxable to the former borrower.
A bad situation, but until tax rates hit 100%, it's still way better than repaying a loan when you no longer own the property.
I'm not an accountant, but generally, cancellation or forgiveness of a debt is income to the person receiving the benefit of the forgiveness or cancellation. Our OP really needs to have an office conference with an accountant.
>>> A bad situation, but until tax rates hit 100%, it's still way better than repaying a loan when you no longer own the property.
But if the bank does not forgive the loan, then you will be repaying the loan even when you no longer own the property.
Here is a great business idea for Goldman Sachs; why not sell property price protection insurance? When the property goes up in the price, they get to keep the premiums. When the property prices tank, they go to uncle sam and get the bail out money from taxpayers. Goldman never has to allocate anything for possible payout. How can they lose?
- Vikas
But if the bank does not forgive the loan, then you will be repaying the loan even when you no longer own the property.
Here is a great business idea for Goldman Sachs; why not sell property price protection insurance? When the property goes up in the price, they get to keep the premiums. When the property prices tank, they go to uncle sam and get the bail out money from taxpayers. Goldman never has to allocate anything for possible payout. How can they lose?
- Vikas
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