Uncle Sam Called: He Wants His Foreclosure Cut

Unloading your home still may mean footing the tax bill

By Willard Shepard
|  Monday, Sep 6, 2010  |  Updated 3:15 PM EDT
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Uncle Sam Called: He Wants His Foreclosure Cut

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They came from Cuba and built a successful architechrual firm.

Now, on a day to remember the value of American hard work, Lilly and Manny Mora are fighting Bank of America over this home they bought five years ago to use when they get older.

Like thousands of South Florida residents, when the economy took a dive, they could no longer afford it. They've gotten three short sale offers, all rejected by the bank.

"They turned all the offers down and now we have to try to find new buyers," Mora said.

The bank is moving to foreclose, but whether it's a short sale or foreclosure, the IRS will get involved. The money the bank forgives can be considered income, and you may to pay the taxes.

In the Mora's worst case scenario, that means about a $50,000-plus tax bill.

"That's outrageous,"  Mora said. "A person already can't afford the home."

"You don't have pay taxes in three situations," Tax attorney Josh Goldglatz, at Bart Chepenik, P.A., said. "First, if the short sale or foreclosure is on your primary home; second, if you're insolvent, and your debts exceed your assets; third, it's a business property."

We contacted Bank of America but haven't received a response.

Also, make sure you don't get a defeciency judgement against you, where the bank could later come after your assets.
 

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