Hi. My husband and I thinking to file bankruptcy. Before the fact I would like to know, if our 4 plex (we live in one unit) will be sold during the bankruptcy process, will we be responsible for capital gain tax?
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Hi niki, welcome to the forum. I already answered you on your Visitor Message question.
Good luck to you
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If the foreclosure is completed while the 4-plex is "property of the bankruptcy estate" then the tax consequences will fall to the estate and you're off the hook.
The problem is that once you file bankruptcy the automatic stay goes into effect which prevents the creditor from foreclosing. In order to proceed with the foreclosure, they either wait for the trustee to abandon the property or file a motion to have the stay lifted and the property abandoned.
Either way, the lender ends up foreclosing when the property is not "property of the estate" and the capital gains issue becomes the debtor's problem.There are two secrets for success in life:
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maybe i understood wrong... i thought that because of amount of equity in my house the bankruptcy agent will sell it. does it mean he/she will be responsible for the tax?Comment
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No, I did. You even wrote "sold" in your first post. I'm just used to foreclosure and read more into your question than was there.
My understanding is that the bankruptcy estate will have to pay the capital gains. Trustee stands in your shoes and will even acquire any tax attributes (suc as loss carryovers) that would have been yours. In some circuits (not sure where each circuit stands on this issue) they can also use your principal residence exclusion to reduce the capital gains (on your pr).
Always a good idea to discuss the tax issues with your accountant or tax attorney.
Good luck
Last edited by debee; 05-23-2011, 05:44 PM.There are two secrets for success in life:
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