ARTICLES & NEWS

REAL ESTATE TAX ARTICLES

Foreclosure and Your Taxes

By Christopher Combs | May 4, 2014

  Question:  We bought our home in a new Gilbert subdivision six years ago.  Although there has been some appreciation lately, our home is worth only $260,000.  We still owe $380,000 on the mortgage.  After my husband lost his job last year, we finally had to stop making payments, and the foreclosure occurred this February.  Our accountant now says that we could have income tax liability for the $120,000 difference between the amount of our mortgage ($380,000) and the value of our home ($260,000) at the time of the foreclosure.  Many of our neighbors in our subdivision have lost their…

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Adios to Mortgage Forgiveness Tax Relief Act ("Act")

By Christopher Combs | December 19, 2013

The general IRS rule is that any forgiveness of debt will be taxable. In response to the housing disaster of the mid-2000’s, the Act was passed by Congress in 2007 to give relief to taxpayers who had debt forgiveness as the result of either a foreclosure or a short sale. The Act was subsequently extended until December 31, 2013. A bill to extend the Act for another two years to December 31, 2015, has been in the Senate Finance Committee since June 19, 2013. GovTrack.us gives this bill a 1% chance of getting out of committee and a zero percent…

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No Taxes Likely Due on Home-Sale Profit

By Christopher Combs | December 14, 2013

 Question:  We bought our first house in west Phoenix for $62,000 cash.  The house is now worth $130,000.  Our air-conditioning business is doing really well, and we want to move to a nicer neighborhood.  My husband’s sister does our tax returns every year, and she says that we will not have to pay any tax on our profit of over $60,000.  Is that true?  My husband’s sister also says that we can buy a new house every two years and never pay tax on any profit if the real-estate market continues to improve.   Is that also true?  It doesn’t…

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Foreigner's Sale Subject to IRS 'Hold Back'

By Christopher Combs | September 6, 2013

  Question: My wife and I are retired snowbirds from Canada who are planning to sell 10 acres of land in north Scottsdale in the near future. Even in this “down” market, the value of the land is at least $600,000. Although we originally were planning on building a home there, we decided that we did not want to live that far away and recently bought a condominium near Scottsdale Fashion Square. Our real-estate agent has said that when we sell this land, the Internal Revenue Service will “hold back” 10 percent of the sale proceeds. I assume “hold back” means that…

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Homestead exemption is automatic

By Christopher Combs | April 15, 2013

  Question: Four years ago, our son had an auto-repair business in Mesa that was struggling. To keep his business alive, we personally guaranteed a loan for our son. After our son’s business ultimately failed, the bank sued us and got a judgment against us. After they recorded the judgment with the Maricopa County Recorder’s Office, this judgment became a lien on our home. Even in this down market, we have at least $200,000 equity in our home. Do we have the protection of the homestead exemption? If so, what do we have to do to prevent the loss of our…

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Free rent to daughter not gift-tax issue

By Christopher Combs | March 23, 2013

   Question: Our daughter recently got divorced. We own a condominium in Surprise that we have used as a second home. We are now letting our daughter and her two children use this Surprise condominium rent-free. Do we have any gift-tax problems by letting our daughter live in this Surprise condominium rent-free?    Answer: Probably not. Although the annual fair rental value of this Surprise condominium is probably a gift to your daughter, there is an annual gift-tax exclusion of $26,000 for a husband and wife ($13,000 for a single person) to any individual such as your daughter. Therefore, unless…

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The Benefits of Partioning Acres

By Christopher Combs | February 23, 2013

   Question: My mother and her two brothers own 3 acres of unimproved desert land in north Scottsdale worth approximately $450,000. They have owned this three acres since the 1920s when my grandfather purchased this land. The problem now is that the property taxes have become expensive, and because my mother is elderly and lives on a fixed income, the payment of her one-third of the property taxes is becoming more difficult every year. Her two brothers do not want to sell the three acres in this depressed market. Is there any way that my mother can require the sale…

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Life After Death? Extension of Debt Relief?

By Christopher Combs | October 17, 2012

   Any forgiveness of debt is generally taxable income.  In 2007 during the height of the housing crisis the Mortgage Debt Relief Act was passed.  Under this Act any debt forgiveness after foreclosure or a short sale by a mortgage lender on a loan used to purchase a primary residence, or to make improvements to a primary residence, is not taxable income.  This Act is now scheduled to expire on December 31, 2012.    The Act had originally been scheduled to expire on December 31, 2010, but was extended for two years until 2012 because the housing crisis still existed. …

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