I was wondering, from a tax perspective, is there any plus/minus to BUYING a home in short sale? Again, I am not talking aboute selling a home. I would be the buyer. Thanks.

Zip Code: 92373

First of all, you should get confirmation of tax implications from your CPA (Andrew...) but from my understanding relative to tax implications, the buyer is purchasing the property just like any other purchase. However, the seller may have a tax implication as a result of the short fall due on the mortgage. Basically, if the seller owes 300k but the bank is willing to accept 260k to sell the property, the seller will realize a tax implication for the 40k difference (not sure if it's a short term or long term gain...).

If you have any other mortgage or residential purchase related questions or want to investigate financing options or rates, call my office or email anytime.

781-932-7149

Best regards,
Bob

thanks, but who are you? sorry I can't tell.

Bob is a Sr. Mortgage Loan Consultant with Bank of America Mortgage. Any of my clients that I have recommended to Bob has been very appreciative of the referral.

Bank of America has a few mortgage programs unique for doctors. If you're looking to purchase or re-finance a home, Bob is a great resource.

Zip Code: cpa@mdtaxes.com

Here is some info on Foreclosures and Giving Property Back to the Lender per BNA, the largest independent publisher of information and analysis products for professionals in law, tax, business, and government. (www.bna.com). Keep in mind that Congress is currently working to change these rules.

3. Foreclosure and Deeds in Lieu Thereof

a. In General
When a taxpayer voluntarily or involuntarily conveys property to a creditor because of the taxpayer's financial or other inability to make the required mortgage payments, amount realized depends on several factors. These include the nature of the conveyance, the voluntariness of the transfer, the extent to which the taxpayer is relieved of liability, whether the creditor bids in at the foreclosure sale, and the fair market value of the property.

b. Voluntary Transfer
If the property owner voluntarily transfers the real property to a creditor in satisfaction of the debt, the amount realized is the amount of the satisfied debt.

Example—Voluntary Satisfaction of Indebtedness
K owns land which he purchased for $100,000 several years ago. K has borrowed heavily and has secured $300,000 of the loans with a mortgage on the land. The land has a fair market value of $310,000. To avoid the unpleasantness of foreclosure and to preserve his investment reputation, K transfers the land to the creditor in full satisfaction of the loans. K's amount realized is $300,000, the amount of the satisfied debt.

c. Strict Foreclosure
If property is conveyed in a strict foreclosure, under which it is transferred under court order, the amount realized is the full amount of the debt.

Example—Strict Foreclosure
L owns land which she purchased for $150,000 several years ago. L has borrowed heavily and has secured $550,000 of the loans with a mortgage on the land. The land has a fair market value of $570,000. L experiences financial problems, and the creditor commences foreclosure proceedings. The court orders L to transfer the land to the creditor in full satisfaction of the loans. L's amount realized is $550,000, the amount of the satisfied debt.

d. Foreclosure Sale to Mortgagee
If the property is sold at a foreclosure sale to the mortgagee, the amount realized is presumed to be the bid price, absent clear and convincing evidence that the fair market value is different than the bid price.

Example—Foreclosure Sale To Mortgagee
B owns land which she purchased for $200,000 several years ago. B has borrowed heavily and has secured $400,000 of the loans with a mortgage on the land. B experiences financial difficulties, and the creditor institutes foreclosure proceedings. At the foreclosure sale, the creditor bids in at $400,000, and acquires the land. B's amount realized is $400,000.

e. Foreclosure Sale to Third Party
If the purchaser at the foreclosure sale is a third party, the amount realized equals the greater of the sale proceeds or the mortgage balance.

Example—Foreclosure Sale to Third Party
C owns land which he purchased for $1,000,000 several years ago. C has borrowed heavily and has secured $3,000,000 of the loans with a nonrecourse mortgage on the land. C experiences financial difficulty. The creditor commences foreclosure proceedings. X, an unrelated person, bids in for $3,500,000, and acquires the land. C's amount realized is $3,500,000, the greater of the $3,000,000 of loans secured by the land or the $3,500,000 sales price. If for some reason the highest bid were $2,800,000, C's amount realized would be $3,000,000, the greater of the $3,000,000 of loans secured by the land or the $2,800,000 sales price.

However, if the sales proceeds exceed the taxpayer's personal liability, and the taxpayer does not receive the excess cash, the amount realized is limited to the amount of the liability.

f. Foreclosure Sale on Recourse Mortgage and Sale Price Less Than Amount of Liability
If the property is sold at a foreclosure sale, the mortgage is recourse, and the sale proceeds are less than the mortgage balance, the amount realized equals the mortgage balance if the taxpayer is discharged from liability under the mortgage.

Example—Discharge from Liability
D owns land which he purchased for $1,000,000 several years ago. D has borrowed heavily and has secured $3,000,000 of the loans with a recourse mortgage on the land. D experiences financial difficulty. The creditor commences foreclosure proceedings. S, an unrelated person, bids in for $2,900,000, and acquires the land. D is discharged from any additional liability with respect to the loans that were secured by the land. D's amount realized is $3,000,000 (the mortgage balance).
If the taxpayer's liability is not discharged, the amount realized equals the sale proceeds.

Example—No Discharge from Liability
E owns land which she purchased for $120,000, giving the seller a $90,000 recourse mortgage on the land. E experiences financial difficulty. The seller commences foreclosure proceedings, and bids in for $72,700 and acquires the land. E is not discharged from liability for the deficiency with respect to the loan that was secured by the land. E's amount realized is $72,700, the sales price.

Zip Code: 01801

I just closed on a home and funded via BOA and Bob Cahill.
VERY PLEASED with his service, his support and the great loan deal. Highly recommended.