Taxes & Real Estate Transactions
Dennis Bean
7/19/13
CHC General Meeting Speaker
First American Title, Fresno, CA
Distinguishing Gains from Cancellation of Indebtedness and Dealing with Tax Liens
Gross Income
Bean, Hunt, Harris & Company
Certified Public Accountants
7110 N Fresno Street #460
Fresno, CA 93720
(559) 221-5071
dennisb@bhhcpas.com
Dennis Bean
7/19/13
CHC General Meeting Speaker
First American Title, Fresno, CA
Distinguishing Gains from Cancellation of Indebtedness and Dealing with Tax Liens
Gross Income
- According to IRC Sec 61, gross income means all income from whatever source derived including the following:
- Gains from Dealings in Property (Deed in Lieu, foreclosures, short sales, etc are all sales for tax purposes)
- Income from discharge of indebtedness (Debt resolved fro less than full amount owed)
- Exclusions from Income
- 108 - Safe Harbors of Indebtedness
- Title 11 case (BKCY)
- Insolvency
- Farm Indebtedness
- Real Property Business Indebtedness
- Qualified Principal Residence Indebtedness
- Acquisition Indebtedness not to exceed $800,000 in CA
- Includes debt to acquire, construct or substantially improve the principal residence of the debtor, secured by the property.
- Principal residence same test as under the IRC 121(Exclusion of gain on sale of personal residence) (N/A to 2nd homes)
- Includes refinanced acquisition indebtedness up to $1,000,000
- Includes limited amount of home equity indebtedness $100,000
- Certificate of Release
- Used when the tax liability has been fully paid or it becomes enforceable under the law or
- the Government has accepted a bond for payment of the tax
- Requires written request and proof of payment, etc
- Certificate of Subordination
- Allows a named creditor to move ahead of federal tax position on the property
- Generally used when new lender refinances the old debt
- Uses form 14134 to apply
- Certificate of Discharge
- Removes the lien from the specific property identified in the certificate
- Used when property being sold
- Lien remains on other properties
- Form 14135 used to apply
- Certificate of Non Attachment
- Removes an erroneous filed lien from the property names in the certificate
- Used when lien attached to property of wrong person (ie, two people with same name)
- Check the title to the property sooner rather than later to id lien holders
- Prepare lien "discharge/release" process early as it often takes 30 - 45 days to get response to lien request from tax agencies
- Review IRS lien instructions to find out what you need to include in request and where request must be filed (www.irs.gov).
Bean, Hunt, Harris & Company
Certified Public Accountants
7110 N Fresno Street #460
Fresno, CA 93720
(559) 221-5071
dennisb@bhhcpas.com
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