If taypayer had loan modification in 2009 and mortgage company decreased loan amount by $127,000, but received no 1099-C showing cancellation of debt, would taxpayer need to include any equity debt of the $127,000 on 09 tax return based on loan modification documents? I can't find anything regarding loan modification in Tax Book, but I did see something on web, but can't recall where I previously saw it.
-
-
Loan Modification - Cancellation of Debt?
Just bumping up hoping to get some input.
Thanks! -
Curious Question
So I am trying to assist by keeping your post up toward the top
I have encountered a couple of loan modifications, but they were reduction in payments only, not principal reduction on the amount of the note.
I found this doing a google search "loan modification principal reduction"
Maybe you can google your clients lender and/or State to find out what the program is and then find out the tax issues.
Keep us posted
SandyComment
-
I don't know if this helps, but in an installment sale where the principal is lowered it is recalculated and the sales price is reduced. Not a forgivness but reduction in the sale price that happened in an earlier year. Nothng is changed in the past but all is recalculated going forward.JGComment
-
Loan Modification - Cancellation of Debt?
I also saw info in pub 4681 where price reduced by seller after purchase was not considered cancellation of debt; however the seller did not reduce price, but a lender reduced price. The taxpayer took out about $50,000 in equity debt so I would think that $50,000 would be considered taxable; however he received NO 1099-C, but it does state that loan was reduced by $127,000 in loan modification paperwork. So, it looks to me that it would still be considered a cancellation of debt based on info from pub 4681, but the example in pub refers to taxpayer receiving a 1099-C. Just wanted some confirmation that my thinking is correct that it would be considered taxable. Taxpayer is saying attorney that assisted in loan modification stated that would not be taxable; but there are always attorneys and real estate agents providing taxpayers with incorrect info.Comment
-
Loan Modification - Cancellation of Debt?
Just bumping up hoping to get additional response.Comment
Comment