In the spirit of Federal Exempt...

[hopefulrelief]

Hi all...
I was reading the questions about federal exemptions regarding medical debt that was discharged and was hoping you smarties could help me too...

We foreclosed on 5 rental properties...withstanding a 72K loss, filed BK and according to our tax guy were able to claim as loss 25k last year, 25k for 2007, and 22k for 2008.

The properties were managed (or mismanaged!) by a property mgmt company who collected rent and paid mortgages from proceeds...according to the management company no profit was ever collected from rent in the time we owned. Cash was paid directly from our pocket many months to cover mortgages . The loss of 72K was based off of what we provided to our tax guy...property tax assessments, mortgage statements, and a total of the cash we paid to the mortgage company beyond what the rent covered (bank acct statements used).

My question is does this sound right? We did sustain major losses but we certainly did not pay out of our pocket in cash 72K! My husband says this is correct...losses are calculated in bigger ways than just the cash out...it scares me to death to claim these losses and then have the IRS in 3 years come knocking. Our tax guy (whom I questioned) acted like I was nuts to question it and "of course...this is how it is calculated." Something just feels off and I don't know if it is because I am frightened on many levels post the trama or if I should be listening to the inner voice!!

Can anyone help?
HR

[Boscoe]

When did you get foreclosed on each property and when did you file BK? Was the BK filed after the foreclosure?

Bottom line is this: Any debt forgiven/discharged in a BK cannot be considered income and be taxable by the IRS. Doesn't matter whether the bk or the foreclosure came first. It is all about the debt. I ask above to get some more information.

You really should talk to a tax accountant on this. They are not really THAT expensive and you will likely save more than you will pay him or her. I paid about $700 for the CPA fee as I had 3 properties to deal with, and he got me a refund back of about $15k!

[hopefulrelief]

Filed in Feb 07, foreclosures all in summer of 07 with the exception of one that we are waiting to foreclose still...title issues.

I think I am comfortable with the fact there is no tax implication...like you getting the return we stand to probably get 2 more large refunds due to losses. IRS says you can only claim 25K per year on such losses...the rest can be carried forward. I am just nervous about it all due to the posts I have read I guess!!1 You are right, we probably do need to get a tax accountant as not to suffer any surprises later down the line! Just thought someone may be able to weigh in...thnks! :0)