Comments for Real Estate Consumer News http://realestateconsumernews.com Real Estate Consumer News is a one stop source for consumers to get the information they want and need concerning real estate Thu, 11 Mar 2010 20:47:25 -0600 http://wordpress.org/?v=2.9.2 hourly 1 Comment on The Mortgage Forgiveness Debt Relief Act by Coletta http://realestateconsumernews.com/foreclosures/the-mortgage-forgiveness-debt-relief-act/comment-page-3/#comment-2452 Coletta Thu, 11 Mar 2010 20:47:25 +0000 http://realestateconsumernews.com/?p=617#comment-2452 Mig Your bank is full of idiots OR people pretending to be idiots! Are they in the state of CA? Here are multiple links that state that non-recourse loans do NOT result in Cancellation of Debt Income: From: http://www.businessfinance.com/nonrecourse-debt.htm Nonrecourse debt – A secured loan with no personal liability. A nonrecourse debt is secured by some form of collateral, under which the borrower has no personal liability. If the loan defaults, then the lender only claims the collateral. The borrower's liability is limited to the collateral put down for the loan. If the collateral is less than the amount still owed when the loan defaults, it is a loss for the lender. From: http://www.irs.gov/newsroom/article/0,,id=174034,00.html Non-recourse loans: A non-recourse loan is a loan for which the lenders only remedy in case of default is to repossess the property being financed or used as collateral. That is, the lender cannot pursue you personally in case of default. Forgiveness of a non-recourse loan resulting from a foreclosure does not result in cancellation of debt income. Taxable cancellation of debt income. (Note: As stated above, cancellation of debt income is not taxable in the case of non-recourse loans.) Step 1 - Figuring Cancellation of Debt Income. (Note: for nonrecourse loans, skip this section. You have no income from cancellation of debt.) From: http://accountant.intuit.com/practice_resources/articles/tax/article.aspx?file=tmdd_1099C-2009 If a client is not personally liable for the debt (nonrecourse), the cancellation of debt does not result in COD income unless one of the following conditions exists: 1. The lender offers a discount for the early payment of the debt [Rev. Rul. 82-202]. 2. The lender agrees to a loan modification that results in the reduction of the principal balance of the debt [Rev. Rul. 91-31] From: http://www.ftb.ca.gov/professionals/taxnews/2007/1007/1007_3.shtml In California, purchase money mortgages, which are mortgages where the borrowed funds are used to purchase the house, are generally treated as non-recourse debt. Mig

Your bank is full of idiots OR people pretending to be idiots!
Are they in the state of CA?

Here are multiple links that state that non-recourse loans do NOT result in Cancellation of Debt Income:

From: http://www.businessfinance.com/nonrecourse-debt.htm

Nonrecourse debt – A secured loan with no personal liability.

A nonrecourse debt is secured by some form of collateral, under which the borrower has no personal liability. If the loan defaults, then the lender only claims the collateral. The borrower’s liability is limited to the collateral put down for the loan. If the collateral is less than the amount still owed when the loan defaults, it is a loss for the lender.

From: http://www.irs.gov/newsroom/article/0,,id=174034,00.html

Non-recourse loans: A non-recourse loan is a loan for which the lenders only remedy in case of default is to repossess the property being financed or used as collateral. That is, the lender cannot pursue you personally in case of default. Forgiveness of a non-recourse loan resulting from a foreclosure does not result in cancellation of debt income.

Taxable cancellation of debt income. (Note: As stated above, cancellation of debt income is not taxable in the case of non-recourse loans.)

Step 1 – Figuring Cancellation of Debt Income. (Note: for nonrecourse loans, skip this section. You have no income from cancellation of debt.)

From: http://accountant.intuit.com/practice_resources/articles/tax/article.aspx?file=tmdd_1099C-2009

If a client is not personally liable for the debt (nonrecourse), the cancellation of debt does not result in COD income unless one of the following conditions exists:

1. The lender offers a discount for the early payment of the debt [Rev. Rul. 82-202].
2. The lender agrees to a loan modification that results in the reduction of the principal balance of the debt [Rev. Rul. 91-31]

From: http://www.ftb.ca.gov/professionals/taxnews/2007/1007/1007_3.shtml

In California, purchase money mortgages, which are mortgages where the borrowed funds are used to purchase the house, are generally treated as non-recourse debt.

]]> Comment on The Mortgage Forgiveness Debt Relief Act by Mig http://realestateconsumernews.com/foreclosures/the-mortgage-forgiveness-debt-relief-act/comment-page-3/#comment-2451 Mig Thu, 11 Mar 2010 20:43:48 +0000 http://realestateconsumernews.com/?p=617#comment-2451 Hi again, and Thanks for the prompt response. Also GMAC has asked me if there is any California legislation document that would say that if it Non Recourse Loan, the canceled debt is not taxable income. As you said, all this is frustrated process... Thanks again. Hi again, and Thanks for the prompt response. Also GMAC has asked me if there is any California legislation document that would say that if it Non Recourse Loan, the canceled debt is not taxable income.
As you said, all this is frustrated process… Thanks again.

]]> Comment on The Mortgage Forgiveness Debt Relief Act by Coletta http://realestateconsumernews.com/foreclosures/the-mortgage-forgiveness-debt-relief-act/comment-page-3/#comment-2450 Coletta Thu, 11 Mar 2010 20:31:08 +0000 http://realestateconsumernews.com/?p=617#comment-2450 Hi Mig I have searched for actual written info specific to box 5 and can not find any. I started my battle with my bank after I spoke to the IRS. They are the ones that told me that box 5 should be checked no on a non-recourse loan, and that it was up to me to get the bank to correct it. Box 5 is what is causing the tax problem and GMAC and ALL OTHER banks know this and I am disgusted that they are playing dumb on the issue. My bank also told me that box 5 should be no and they would correct it. However, NOW they are saying that since all laws in regards to this are geared toward foreclosures and do not mention short sales, that they may not correct my 1099-C after all. But THAT is a whole other issue. Hi Mig

I have searched for actual written info specific to box 5 and can not find any. I started my battle with my bank after I spoke to the IRS. They are the ones that told me that box 5 should be checked no on a non-recourse loan, and that it was up to me to get the bank to correct it.

Box 5 is what is causing the tax problem and GMAC and ALL OTHER banks know this and I am disgusted that they are playing dumb on the issue.

My bank also told me that box 5 should be no and they would correct it.
However, NOW they are saying that since all laws in regards to this are geared toward foreclosures and do not mention short sales, that they may not correct my 1099-C after all.

But THAT is a whole other issue.

]]> Comment on The Mortgage Forgiveness Debt Relief Act by Mig http://realestateconsumernews.com/foreclosures/the-mortgage-forgiveness-debt-relief-act/comment-page-3/#comment-2449 Mig Thu, 11 Mar 2010 20:24:39 +0000 http://realestateconsumernews.com/?p=617#comment-2449 Hi Coletta, I am in contact with GMAC and they are asking if there is any specific tax legislation doc that state that the check box # should be No. Their position is that it is correctly done. By any chance do you know how or from where I can get it? Thanks Hi Coletta, I am in contact with GMAC and they are asking if there is any specific tax legislation doc that state that the check box # should be No. Their position is that it is correctly done. By any chance do you know how or from where I can get it? Thanks

]]> Comment on And now for the other side of the coin on the home-buyer tax credit by Marie Piascik http://realestateconsumernews.com/financing/and-now-for-the-other-side-of-the-coin-on-the-home-buyer-tax-credit/comment-page-1/#comment-2447 Marie Piascik Wed, 10 Mar 2010 22:55:40 +0000 http://realestateconsumernews.com/?p=1792#comment-2447 That is a great article. I really believe it will work out to be a very crucial piece of information in the future for me. That is a great article. I really believe it will work out to be a very crucial piece of information in the future for me.

]]> Comment on The Mortgage Forgiveness Debt Relief Act by Mig http://realestateconsumernews.com/foreclosures/the-mortgage-forgiveness-debt-relief-act/comment-page-3/#comment-2446 Mig Wed, 10 Mar 2010 20:20:31 +0000 http://realestateconsumernews.com/?p=617#comment-2446 Did further reading of IRS Pub 4681 on exclusion of canceled debt as ordinary income that stays as follow ""... You can exclude canceled debt from income if it is qualified principal residence indebtedness. Qualified principal residence indebtedness is any debt incurred in acquiring, constructing, or substantially improving your principal residence and which is secured by your principal residence. Qualified principal residence indebtedness also includes any debt secured by your principal residence resulting from the refinancing of debt incurred to acquire, construct, or substantially improve your principal residence but only to the extent the amount of debt does not exceed the amount of the refinanced debt. " Based on this, I think the 1099-C shouldn't have been issued since despite of the canceled debt is a ordinary income, it becomes excluded of being treated as such resulting non ordinary income with no need to issue 1099-C. Well this is my interpretation that I have told to GMAC. Let's see what happens. Did further reading of IRS Pub 4681 on exclusion of canceled debt as ordinary income that stays as follow “”… You can exclude canceled debt from income if it is qualified principal residence indebtedness. Qualified principal residence indebtedness is any debt incurred in acquiring, constructing, or substantially improving your principal residence and which is secured by your principal residence. Qualified principal residence indebtedness also includes any debt secured by your principal residence resulting from the refinancing of debt incurred to acquire, construct, or substantially improve your principal residence but only to the extent the amount of debt does not exceed the amount of the refinanced debt. ”
Based on this, I think the 1099-C shouldn’t have been issued since despite of the canceled debt is a ordinary income, it becomes excluded of being treated as such resulting non ordinary income with no need to issue 1099-C. Well this is my interpretation that I have told to GMAC. Let’s see what happens.

]]> Comment on The Mortgage Forgiveness Debt Relief Act by Coletta http://realestateconsumernews.com/foreclosures/the-mortgage-forgiveness-debt-relief-act/comment-page-3/#comment-2445 Coletta Wed, 10 Mar 2010 19:28:46 +0000 http://realestateconsumernews.com/?p=617#comment-2445 Mig The bank is correct in sending out the 1099-C. The issue is box 5. Box 5 asks if the borrower is liable for the debt. This is in reference to the canceled debt, not the actual home loan. On a non-recourse loan, box 5 would be checked no. NO because YOU the borrow are not liable for the debt. (the cancelation debt) Mig

The bank is correct in sending out the 1099-C.
The issue is box 5.

Box 5 asks if the borrower is liable for the debt.
This is in reference to the canceled debt, not the actual home loan.

On a non-recourse loan, box 5 would be checked no. NO because YOU the borrow are not liable for the debt. (the cancelation debt)

]]> Comment on The Mortgage Forgiveness Debt Relief Act by Mig http://realestateconsumernews.com/foreclosures/the-mortgage-forgiveness-debt-relief-act/comment-page-3/#comment-2444 Mig Wed, 10 Mar 2010 19:06:01 +0000 http://realestateconsumernews.com/?p=617#comment-2444 I did further analysis of the IRS Publication 4681 and it seems correct that GMAC has issueed 1099-C with check box # as Yes for the Loan Modification situation. This is because as follow: IRS PUB 4681 define that "If you are not personally liable for the debt, you do not have ordinary income from the cancellation of debt unless the lender offers a discount for the early payment of the debt or agrees to a loan modification that results in the reduction of the principal balance of the debt... " Later in the section "Discounts and loan modifications" describes that "If a lender offers to discount (reduce) the principal balance of a loan if the loan is paid off early, or agrees to a loan modification (a “workout”) that includes a reduction in the principal balance of a loan, the amount of the discount or the amount of principal reduction is canceled debt whether or not you are personally liable for the debt.The amount of the canceled debt must be included in income unless certain exceptions or exclusions apply." Therefore as a result of this definitions, the only solution for my situation is the comformity of CA State to the The Mortgage Forgiveness Debt Relief Act. And the loan being Non Recourse or Recours becomes secondary subject in the case of Loan Modification. Since I am not tax expert, I would appreciate if anybody can confirm and that would be great. Thanks. I did further analysis of the IRS Publication 4681 and it seems correct that GMAC has issueed 1099-C with check box # as Yes for the Loan Modification situation. This is because as follow: IRS PUB 4681 define that “If you are not personally liable for the debt, you do not have ordinary income from the cancellation of debt unless the lender offers a discount for the early payment of the debt or agrees to a loan modification that results in the reduction of the principal balance of the debt… ” Later in the section “Discounts and loan modifications” describes that “If a lender offers to discount (reduce) the principal balance of a loan if the loan is paid off early, or agrees to a loan modification (a “workout”) that includes a reduction in the principal balance of a loan, the amount of the discount or the amount of principal reduction is canceled debt whether or not you are personally liable for the debt.The amount of the canceled debt must be included in income unless certain exceptions or exclusions apply.” Therefore as a result of this definitions, the only solution for my situation is the comformity of CA State to the The Mortgage Forgiveness Debt Relief Act. And the loan being Non Recourse or Recours becomes secondary subject in the case of Loan Modification. Since I am not tax expert, I would appreciate if anybody can confirm and that would be great. Thanks.

]]> Comment on The Mortgage Forgiveness Debt Relief Act by Mig http://realestateconsumernews.com/foreclosures/the-mortgage-forgiveness-debt-relief-act/comment-page-3/#comment-2443 Mig Wed, 10 Mar 2010 18:14:08 +0000 http://realestateconsumernews.com/?p=617#comment-2443 Hi Coletta, I just found out from GMAC that the loan before and after Loan Modification are Non Recourse. Now, I need to tell GMAC that either 1099-C shouldn't have been sent out or have the box 5 as No. By chance is there any link from IRS that mention such that in case of Non Recourse Loan what supposed to be done? And secondly is there any link for FTB or CA saying that case of Non Recourse Loan the forgiven amount is non taxable income? Thanks Again. - Miguel Hi Coletta, I just found out from GMAC that the loan before and after Loan Modification are Non Recourse. Now, I need to tell GMAC that either 1099-C shouldn’t have been sent out or have the box 5 as No. By chance is there any link from IRS that mention such that in case of Non Recourse Loan what supposed to be done? And secondly is there any link for FTB or CA saying that case of Non Recourse Loan the forgiven amount is non taxable income? Thanks Again. – Miguel

]]> Comment on The Mortgage Forgiveness Debt Relief Act by Coletta http://realestateconsumernews.com/foreclosures/the-mortgage-forgiveness-debt-relief-act/comment-page-3/#comment-2411 Coletta Fri, 05 Mar 2010 19:37:19 +0000 http://realestateconsumernews.com/?p=617#comment-2411 true! but if the banks would send out CORRECT forms to begin with, then thousands of people, who had non-recourse loans, would not have to sit around and wait for a bill to pass. true!
but if the banks would send out CORRECT forms to begin with, then thousands of people, who had non-recourse loans, would not have to sit around and wait for a bill to pass.

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