Taxes on repossesed home

[sandrat]

What is the name of your state? NM
We have a house in Colorado (we have been in NM for the last two years) that we signed over the deed in lieu of foreclosure. The mortgage company sold the house at auction for $50,000. We owed $99,000. They forgave the deficiency. We have been told we now have to pay taxes ($11,000) on the amount that was forgiven. Is this true?

 

[HomeGuru]

What is the name of your state? NM
We have a house in Colorado (we have been in NM for the last two years) that we signed over the deed in lieu of foreclosure. The mortgage company sold the house at auction for $50,000. We owed $99,000. They forgave the deficiency. We have been told we now have to pay taxes ($11,000) on the amount that was forgiven. Is this true?

**A: not really. $49K should be reported as income for tax purposes but only if the lender sends you an IRS form in the 1090's.

 

[HomeGuru]

What was the market value of the property?

 

[sandrat]

The form they sent to me said "Fair Market Value $50,000."

 

[HomeGuru]

The form they sent to me said "Fair Market Value $50,000."

**A: no comment since you have not clarified who sent you the form ie. IRS, the mortgage lender, the court, the appraiser........and what type of form it is.

 

[sandrat]

The form was sent from my mortgage company. I'm unsure of the type of form, it is with the lady preparing my taxes. I can call and ask her later today. Six months ago I had a fair market analysis done to see if the mortgagae company would consider a short sale. That came back with a FMV of $83,000.

 

[HomeGuru]

OK, when you find out exactly where this form came from, post on the Tax Law forum.