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| Monday, February 04, 2008 |
| Foreclosure Income? |
This DownEast Magazine article: Foreclosure Income? Let’s go back to Basics! explains how losing your home to foreclosure could result in a large income tax bill. It’s the person who, for example, purchased a duplex and lived in one side of it — until the rents wouldn’t cover enough of the mortgage. Their personal side would probably be ok under the two rules for homeowners: the gain exclusion on sale of personal residence and the new Mortgage Forgiveness Debt Relief. The rental half is a tax disaster! The “cancellation of debt income” would be taxable unless they are insolvent or in bankruptcy. Additionally, the “gain on sale” of that half would be taxable as the sale of a business or rental property. Ouch. |
| posted by Boston Gal @ 9:01 PM *
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| 3 Comments: |
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And the poor and downtrodden get screwed yet again.
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The poor and downtrodden? More like the greedy and/or ignorant are being forced to lie in the beds they've made...
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@Simone: Oh, please. If they couldn't afford the mortgage reset rates, they should not have purchased a home.
My boyfriend and I will make a combined income of over $400,000 this year. Are we buying a home with that? Not unless we move to a less expensive area (currently living in Silicon Valley.) Why? Because house prices here are ridiculous! We'd be looking at $1M for a non-crapshack, and that's not worth it even with high income. Instead, we sock over $15,000 a month away in investments and live in an inexpensive rental duplex.
I have no sympathy for those who bought at the top looking for quick gains and didn't realize that they couldn't afford the mortgage payments. The only government bill I'd like to see passed is mandatory personal finance education in schools for at least 2 separate years, so folks don't get in this position in the future.
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And the poor and downtrodden get screwed yet again.