The Observation Deck

This heartbreaking story should all have us thinking: Who am I to judge?

http://alisavaldesrodriguez.blogspot.co ... ified.html

Sadly right now so many people are facing these tough decisions. Just look at the prices of homes in Lakewood and you'll see that many people have mortgages with balances higher than the value of their homes. I will admit I am not super tax savvy and I know this is off topic but how will plummeting home values affect the revenue that comes from property taxes. I understand property taxes help fund our schools and I am curious as to when they are adjusted again.

Bill Call wrote:This heartbreaking story should all have us thinking: Who am I to judge?

http://alisavaldesrodriguez.blogspot.co ... ified.html

Bill

About a year ago I posted a thing that said "Just walk away now and you can get a great deal on a rental." Everyone thought I was just being a smart ass.

Now...


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There are other costs of walking away from a loan. In this instance the blogger will have taxable income of $50k unless she can prove she was insolvent at the time - the difference between the loan balance and what the bank settles for. The bank will issue a 1099 at the end of the year and let the IRS know about this income. Assuming a marginal tax rate of 20%, she will owe an additional $10,000 in taxes. If she can't pay this then the IRS will be glad to add interest and penalties making the $10,000 closer to $14,000.

I read her article. What taxable income? She's losing money no matter what she does, so what is the income?

I don't see any capital gains here for her.

sharon kinsella wrote:I read her article. What taxable income? She's losing money no matter what she does, so what is the income?

I don't see any capital gains here for her.

Forgiveness of a mortgage debt is taxable income. If you owe $100,000 and the bank writes it off you have just earned $100,000. It doesn't matter if you spent the money on a house or a hooker it's still taxable.