Posted by Dave T on July 07, 2002 at 10:29:32:
Yes, the difference between the taxpayer’s cost basis and the sale price is taxable capital gain and eligible for exclusion if the taxpayer satisfies the two year rule.
The amount of mortgage debt above the sale price is taxable as ordinary income.
buy note instead of short sale? - Posted by Phil
Posted by Phil on July 04, 2002 at 18:36:24:
I have had trouble, as i read below, on sellers balking on a short sale when they learn of the tax problem. I have a line of credit with a bank and was considering using that, if i talk them into it, to buy the note. Anyone else use their line of credit like this?
The one downside i see is if the seller makes up the payments, but then i would have a cheap note. I would refi then L/O it. Any input on this?
Also would the Loss mitigation department still be the one to approach about this?
Re: buy note instead of short sale? - Posted by Juan
Posted by Juan on July 05, 2002 at 13:44:56:
Phil,
This is a good idea, it would be even better if you get the homeowner to deed you the house. Do not let the bank know you are doing that.
Some banks are more apt to take a discount over a short sale, why, I can’t figure why banks think that way. Make sure the bank knows you are make a cash offer and can close quickly.
Juan
From a practical standpoint… - Posted by JT-IN
Posted by JT-IN on July 04, 2002 at 21:27:54:
Phil:
From a practical standpoint, when a homeowner can qualify for a Short Sale, there is normally no tax due on the short fall. A borrower must be in some financial difficulty to qualify, and it will be this same difficulty that will negate any taxes due, in almost all cases.
Familiarize yourself with IRS Publ 544 and its application; see it here…
JT-IN
Re: From a practical standpoint… - Posted by Steve
Posted by Steve on July 05, 2002 at 09:39:44:
JT, if a homeowner qualifies for the “2 out of 5” rule to be eligable for the $250k exemption (or $500k if married), would any gain on a short sale be excluded under this rule?