Can surrendered vehicle be listed as loss on tax return?

[AMISLANDER]

I most likely will have to surrender my 2000 4Runner to the FL bk trustee unless they show mercy on me...my mom became a lienholder on the vehicle but the trustee doesn't want to honor my promissary note.

So...they get a gas guzzling, 2 catalytic converter needing, all belts need help, oxygen sensor deprived, never know when the car is going to "click" start SUV. Now they tell me 2000 was a bad 4runner year...

Since I have to give up an "asset" of a certain value, can I report it as a loss on my tax return for 2006?

I am asking this question due to the fact that I "stupidly" did a settlement offer with Mastercard I think it was MBNA for 60% and they added the $4,500 that I paid to my tax return as income back in 2004 and IRS says that I owe a good $5K+ because I underestimated my income......so now I have outcome...probably $6-7K worth of truck that would definitely help on my tax return!

Maybe?

[HHM]

First question, do you itemize your deductions? If no, then it doesn't matter, if yes.....

Interesting question, I am not sure how a repo, due to bankruptcy, is treated. Under normal circumstances, a repossession or foreclosure is treated as a sale or exchange for tax purposes, thus, you can realize a gain or loss for tax purposes. However, the calculation is not very straightforward, under an auto repo, you also have to factor in the "forgiveness" of the outstanding debt. So in a typical repo scenario, most people realize a net gain (i.e. income), not a loss. Because, typically, the fair market value of the car is less than the amount of debt owed, so the Debtor has to claim as income the difference between the fair market value of the car and the outstanding debt as income. It also depends if you would be personally liable for the debt, in your mom's case, if all you did is pledge the truck as security but did not assume personal liability (non-recourse debt), you do not get to claim any loss on your taxes.

If I had to guess, since any personal liability you may have toward the remaining debt is extinguished in the BK, you won't get to claim a loss, (and to your benefit, you wont have to claim a gain either).

MBNA would not have reported the amount you "paid" as income to you, it was the amount of debt they "forgave" that was (or should have been) reported as your income. Unfortunately, any time someone forgives a debt, it is technically income. However, this does not apply in bankruptcy.

[AMISLANDER]

First question, do you itemize your deductions? If no, then it doesn't matter, if yes.....

Interesting question, I am not sure how a repo, due to bankruptcy, is treated. Under normal circumstances, a repossession or foreclosure is treated as a sale or exchange for tax purposes, thus, you can realize a gain or loss for tax purposes. However, the calculation is not very straightforward, under an auto repo, you also have to factor in the "forgiveness" of the outstanding debt. So in a typical repo scenario, most people realize a net gain (i.e. income), not a loss. Because, typically, the fair market value of the car is less than the amount of debt owed, so the Debtor has to claim as income the difference between the fair market value of the car and the outstanding debt as income. It also depends if you would be personally liable for the debt, in your mom's case, if all you did is pledge the truck as security but did not assume personal liability (non-recourse debt), you do not get to claim any loss on your taxes.

If I had to guess, since any personal liability you may have toward the remaining debt is extinguished in the BK, you won't get to claim a loss, (and to your benefit, you wont have to claim a gain either).

MBNA would not have reported the amount you "paid" as income to you, it was the amount of debt they "forgave" that was (or should have been) reported as your income. Unfortunately, any time someone forgives a debt, it is technically income. However, this does not apply in bankruptcy.

Well, that s*cks....I just have to get through another year of bad luck and then I am done! (broke a mirror back in 2001...don't ask it was big & I was mad and it's been bad, ever since)....

[CindyLou]

Question: why did the trustee not honor the lein. My parents loaned my brother to buy a car ($10,000) over a year ago. They filed a lein at the courthouse and the DMV. They actually paid for the the car. It was a vaild loan. Is this close to your situation or was yours different???????? He will be filing chp. 7 this year. He hasn't paid them a penny. But plans to begin paying soon.