All,
I have a client that just completed a short sale on their rental property. They got 236K for the home, which had a mortgage of 535K (which is more or less their basis), and a fair value of about 250K. They want me to do a little projection on the consequences, and I wanted to run my assessment by all of you as well.
The client will have debt forgiveness income of 299K (535-236). They will have a loss on the disposal of the property of the same amount (535K basis less 236K selling price). Since this is business use real property, the loss is an ordinary loss which can offset the ordinary income produced by the debt forgiveness, correct? (Ignore for a moment depreciation recapture.) Thoughts?
ATG
I have a client that just completed a short sale on their rental property. They got 236K for the home, which had a mortgage of 535K (which is more or less their basis), and a fair value of about 250K. They want me to do a little projection on the consequences, and I wanted to run my assessment by all of you as well.
The client will have debt forgiveness income of 299K (535-236). They will have a loss on the disposal of the property of the same amount (535K basis less 236K selling price). Since this is business use real property, the loss is an ordinary loss which can offset the ordinary income produced by the debt forgiveness, correct? (Ignore for a moment depreciation recapture.) Thoughts?
ATG
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