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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Broken_Clock who wrote (85191)	8/14/2007 12:18:50 PM
From: ChanceIs	Read Replies (1) \| Respond to of 306849

>>>bingo. now try arguing that with the tax court!<<< Hmmmm. Hmmmmmmmmmmmmmmm. Hmmmmmmmmmmmmmmmmmmmmmmm. 1) You were behind on your mortgage payments, 2) You cut a deal with the bank to make a short sale to avoid foreclosure, 3) You did this to optimize your financial position vis-a-vis the bank but to also otherwise avoid taxes you would have owed and to make the IRS less liable to collect against the property you sold. 4) IRS thinks this sale invalid. The above seems minimally plausible but a little harsh, even for the IRS. IRS DOES NOT LIKE MOVES EXPLICITLY DESIGNED TO AVOID TAXES - eg offshore tax shelters. Tax rates differences between businesses and individuals notwithstanding, it is a wash for IRS. The bank would experience a higher net because of greater value received via the short sale process while the individual would incur a smaller loss. This matter has surely occurred before. I suspect that the answer lies not in tax code but tax case law. IRS loves to make examples of individual abusers to put fear into the heart of J6P. I would venture to guess that if you are on IRS' list of abusers/deadbeats with suspected high worth assets that they might try the above reasoning. Like I said, this could make things REALLY interesting for title insurance companies the next few years. I loath paying title insurance - always seemed like a ripoff. (Of course we could give America back tot he Indians or do slavery reparations - you never know.) Having said that, I think if I bought a foreclosed/short sale property, I would be happy to insure it for twice what I paid. The premium would no doubt be 4X normal. Any tax attorneys out there?