I have had many emails, discussions and classes regarding matters of the forgiveness of debt tax. Suffice it to say that the Congress did NOT extend that favorable tax rule past December 31st of LAST YEAR!!! Of course, you know that. It is old news as I reported that in a news brief at the beginning of January.
Before you get all upset and abandon opportunities to help and assist parties, let me share with you our FIRST TOOL FOR 2015, an alternative to that Mortgage Debt Forgiveness Act, that allows us to assist homeowners in NOT having to pay any tax on debt forgiven .
WE HAVE ANOTHER FAVORABLE TAX LAW… THIS ONE DID NOT EXPIRE ON DEC. 31ST!!
Some of you have heard about this favorable tax law. Most haven’t. Don’t feel bad. It is the domain of attorneys and CPA’s. It can get a bit complicated and it requires some credentials that are really beyond the scope of your license out there my friends.
I want you all to be aware that it exists and then get your seller in for a consultation with one of our attorneys and we will be happy to go over all their tax issues associated with any real estate that they own. We call this the insolvency exception and it can be as good for your seller as that tax law that will expire on December 31st this year.
THE INSOLVENCY EXEMPTION FROM THE INTERNAL REVENUE SERVICE IS AN INTEGRAL PART OF OUR TAX PRACTICE
This exemption has been a part of the tax code for a long time. This exemption does NOT expire on December 31st. This exemption is useful even if your seller is not occupying the subject short sale property. It is a far broader exception than the law that expires this year.
We ALWAYS go over the insolvency exemption in each of our consultations. We have a whole raft of literature including worksheets and the like to allow sellers to feel comfortable EVEN AS the Congress sat on its hands and did nothing (as we expect) and failed to reintroduce that law that expired this past December 31st.
In short, we also have literature and videos on these matters that can be of help and assistance. [See below for a list of helpful videos that you can give your customers].
BE CAREFUL USING THIS SPECIAL TAX LAW AS IT HAS A LOT OF MOVING PARTS
Never blindly say, “…don’t worry about it as you can claim insolvency”. I hear that time and again and I would never be so bold as to say such a thing without going through the analysis to help the client know for sure.
I think the best practice here is “talk tax with your sellers” [but not give tax advice to your sellers], and make sure that they talk with one of our attorneys about that aspect of it and buy yourself insurance and confidence that you can proceed with your deal regardless of what the Congress has done.
Happy Investing!
Today's blog courtesy of Ed McFrerran, McFerran & Burns
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