I have a client that purchased a property for $300,000. It is now only worth $150K and he is shortselling it. It is my understanding that because it is an investment property he is going to be taxed on the forgiveness amount. So is he going to have to pay 150K x33.33% on the debt forgivness? Isn’t there a write off for the loss? Does it balance out? Someone tried to explain it to me earlier, but I got lost with the numbers, lol. I know a law was passed as of last year form 982. Somebody please explain this to me!!!
It may not be taxable if he is insolvent. Check with a CPA or tax expert knowledgeable in this area.
what determines insovency? what are some situations that would consider him to be insolvent? I know your word isn’t legal advice, but I’m just trying to grasp this whole thing
Solvency or lack thereof (insolvency) is having the ability to meet your financial obligations.
IRS defines insolvent as liabilities greater than assets.
he needs a CPA. this is not a “do it yourself” issue.