Lose Home, Pay Taxes
Posted Aug 20, 2007 7:33 AM CST
By Debra Cassens Weiss
Some homeowners who lost their homes in foreclosure are facing bills for unpaid income taxes on the forgiven debt.
The so-called 1099 shortfall results in a tax bill when the value of the house is less than what is owed on the mortgage, the New York Times reports. The homeowner can be excused from taxes on the forgiven debt, though, in cases of bankruptcy.
Some homeowners are fighting the tax bills and winning; others are negotiating lower payments, the newspaper says. Lawyers representing homeowners are contending they are not liable for the taxes because of insolvency or because the mortgage lender inflated the home’s original value in a flawed loan process.