bankruptsy tax liability
My new wife of five months filed chapter 7 in july 2005. She and her husband at the time both filed separately. They both recieved full forgiveness of debts, which included the family home. Now last month I recieved a 1099 A with her name on the claims a $27000 deficit between the principle owed and the fair market value. The last I heard a realtor had purchased the house and was trying to sell it. Do we have to claim the 27000 as income. I was under the impression that the taxes had to be paid through the estate by the trustie. If we are liable, shouldn't her ex- husband have to claim half. They were both on the house. I have asked many cpa's aound town and they all say the same thing. '' I have to check on that'' would it be more beneficial to file separately this year. We had plans to itemize. Thank you in advance
2 Answers from Attorneys
Re: bankruptsy tax liability
This is a common practice for mortgage companies when a house has been surrendered or foreclosed on and there is a deficiency balance. You really need to get with a bankruptcy attorney to discuss your options. Your attorney may want to contest this. You should not be liable for any taxes after the house was surrendered. An accountant will not be able to help you with this problem, except to explain at the time you file your taxes to the IRS that your wife was insolvent at the time, which, according to the tax code, should excuse her from claiming this amount as income. You will need an accountant and an attorney or an attorney/accountant.
Re: bankruptsy tax liability
This is an interesting issue. Do you know if the house went to foreclosure sale. Typically, the Bank will bid what is owed on the note, which has the effect of wiping away any liability to the Debtor. Please feel free to call me for a free consultation. I have a few questions that could change my answer. You can reach me by clicking on my contact info.
Related Questions & Answers
-
Michigan homestead tax refund how do I go about getting the proper forms? Asked 2/04/07, 11:47 am in United States Michigan Tax and Taxation Law