Financial Information
Determining Tax Basis at Foreclosure or a Short Sale?
Question : Determining Tax Basis at Foreclosure or a Short Sale?
I have two investment property’s that I am attempting to sell via short sale. I am trying to determine what the basis will be at disposition. Is it the sale price? Or, assuming there are no acceptable bids, what the bank bids it in at, which most likely will be what is owed on the mortgage? I refinanced each property to complete my primary residence. Can that be forgiven under The Debt Relief Act and will I be allowed to reduce the basis as a business related debt? Thank you.
business debt relief
Best answer:
Answer by Wayne Z
The basis is the original cost plus improvements less depreciation. It has nothing to do with what is owed on the properties.
The mortgage debt relief act only applies to your primary residence.
See a professional.
I doubt investment properties are covered – probably only personal residences – you are on your own for investment property – you would have a loss on the sale offset by loan forgiveness – IF they forgive the loan – would probably cancel each other out
the cost basis on an investment property is your purchase price, plus major improvements (not repair and maintenance) less accumulated depreciation
and why would you want to lower your cost basis even more?- that would lower your loss on the property
the “sale price” will be whatever you get