HAMP Give Away

[Sparky]

First time seeing how lucrative this Government program is.

Client has a home loan with a 12% rate; can hardly make payments due to concrete business being down; and has not paid property tax on home in about 8 years.

Through the HAMP modification he now has a loan at 1%, and was forgiven all the back taxes (which included delinquent water bills!) to the tune of $38,000.

Since the 38K was to pay for property tax, a deductible expense, he feels he can deduct this gift. My head is spinning. Is this for real?

[mastertaxguy]

What reporting documents (1099-Misc, 1099-C or A, etc) did the taxpayer receive? Was this part of the National Mortgage Foreclosure Settlement process?

By comparison as to tax treatment under the national mortgage foreclosure settlement, IRS issue Rev Pro 2014-2 which deals with tax treatment of many payments under THAT program. (I may have missed the TTB staff update on that particular issue.)

If your TP can separate water bills from the actual property taxes, one would think the property tax amount may be a wash in terms of debt foregiveness: math may be tricky depending on other deductions seeminly not unlike a taxable recovery for a deduction taken in an earlier year (i.e. casualty losses).

[Sparky]

HAMP cont.

. . . we broke it down that about 16K could be taken as an itemized deduction for taxes paid. The other payment was all the accrued penalties, interest and water bills because the taxes were not paid in eight years.

[ruthes]

HAMP giveaway

You need to get on the IRS website and ask for pub 4681. It explains the program.