94 yo mother and a foreclosure notice

[altoonatown]

I need some advice for my 94 yo mother who is very sharp but got caught up in the glimmer of $$$ she could take out of her properties when times were good...so she did just that and now her 3 florida investment properties are worth half what she owes. she stopped paying the mortgage on the florida key property 1 year ago but kept up the hoa and taxes at my request...the bank called 2 months ago and wanted her to put the condo on the market at market price which she did and then when it didn't sell they called the realtor and had her reduce the price...now last week the bank called the realtor again and told her to reduce the price again and the realtor told them there's no buyers and that there are properties right next door in newer and better shape and it won't matter if the price is reduced or not...today my mother got a letter of foreclosure from chase...she was unsuccessful in contacting the tampa attorney...his mailbox was full

I guess my question is whether the bank would do a deed in lieu or renegotiate the loan down to what they would eventually have to sell it for at foreclosure...or should she just let it go and let my brother continue to live in it rent free??

If they were willing to talk about a new loan would they wipe out the difference/forgive and her not be responsible for the difference with respect to the IRS?? or is someone responsible for the deficiency no matter what?

not sure how to guide her here so any help would be appreciated

[justbroke]

You would need to contact the bank to do a deed-in-lieu. Typically, they want it on the market at least 30-90 days to get a feel for what the market will bare. It reads as though this was already done. Now, it's just a matter of calling and asking to speak to the department handling pre-foreclosure/foreclosure issues (loss mitigation). You should ask about HAMP/HAFA and a deed-in-lieu since it's already on the market.

She could have serious tax liabilities since a 1099-C (Forgiveness of Debt) would absolutely be issued. You may want to speak to a tax accountant/attorney and/or a bankruptcy attorney to see what the best course of action is.

[altoonatown]

do you think that there's any chance that a total forgiveness of the difficiency is possible?? or legal?? she tells me that she's read somewhere that this is done and quite honestly i don't know and it doesn't seem logical to me...but i'm no genius

[justbroke]

I think you misunderstand what a 1099-C is. A 1099-C is actually "forgiveness" of the debt. However, it is illegal for a financial institution to "forgive" a debt without filing a 1099-C. I mean, the whole purpose of the form is that they "forgave" the debt. Our friends in Washington, however, see this as if you received a windfall of money (capital gain) and treat it as ordinary income.

There is IRS Form 982 which goes through how to prove that you were insolvent at the time the debt was forgiven. Bankruptcy makes this easier since the first "exclusion" on the form is for a debt forgiven due to bankruptcy. Definitely speak to some really good tax consultants! Don't make the mistake of "thinking" that someone can "forgive" the debt and relying on something you read on the Internet... including what I'm posting!

When you get into the Reduction of Tax Attributes (IRS 982) discussion, you should really be speaking with a tax expert. (See also IRS Publication 4681.)

Seek professional assistance, please.

[AngelinaCatHub]

In no way would I argue fact with JB, but here is a thought: What is her current income and from where? (Don't need pricing). If she underpays her taxes due to a huge 1099, she may be able to mitigate with IRS or in the least, make payments as I have been doing for years.

Now, I do not wish to be untactful, but she is 92, and I believe her tax liability does end upon death. If she is/was smart she has made financial planning to avoid tax liabilities to her heirs.

You have a lot to look at on her behalf as well as your own if you are an heir. She probably does not have that much in this economy, but if she does, be careful in the timing so nothing looks like hiding assets for constructive fraud. 'Hub

[justbroke]

Hub, I mentioned that Form 982 may provide some relief, but I would still proceed with caution. Death does not end taxation. It only stops taxation from the time of decease (accrual or earnings after death are not taxed). I know this because when my brother died, the tax man wanted his cut!

[AngelinaCatHub]

Hub, I mentioned that Form 982 may provide some relief, but I would still proceed with caution. Death does not end taxation. It only stops taxation from the time of decease (accrual or earnings after death are not taxed). I know this because when my brother died, the tax man wanted his cut!

Bastards aren't they? 'Hub

[LadyInTheRed]

(accrual or earnings after death are not taxed).

Post-death earnings are taxed to the estate or the beneficiary who receives the earnings.

[AngelinaCatHub]

Post-death earnings are taxed to the estate or the beneficiary who receives the earnings.

Bastards aren't they. 'Hub

[justbroke]

Yes, I forgot that a "new" estate is created called the tax estate, and that too may have to pay taxes. At least the decedent doesn't need to personally pay them. In the end, the tax man still gets his cut.

[altoonatown]

they just served my mother with papers telling her a lawsuit had been filed and she had 20 days to respond. we have an appointment with a bk atty next tuesday so hope all goes well.

this seems like they're moving pretty fast or is this just the course of events??? should i tell my brother to start looking for another place to live soon?? or just hang in there until they give us a date of foreclosure??