Quote:
Originally Posted by abouttowalkaway  By bailing, are we changing the tax implications of our existing home's deficiency because it will no longer be considered our primary home at the time of foreclosure? Will be get 1099'd? |
The
Mortgage Forgiveness Debt Relief Act of 2007 defers to the states to decide if a loan is recourse or non-recourse.
Home Foreclosure and Debt Cancellation Non-recourse loans:A non-recourse loan is a loan for which the lender’s only remedy in case of default is to repossess the property being financed or used as collateral.That is, the lender cannot pursue you personally in case of default.Forgiveness of a non-recourse loan resulting from a foreclosure does not result in cancellation of debt income.However, it may result in other tax consequences, as discussed in Question 3 below.
If your house qualifies for non-recourse status then you also qualify for exemption from a 1099 as a result of debt-cancellation.
Now.. Arizona law says if the home is a 1 to 4 family dwelling on less than 2.5 acres of land then the home is exempt. The law does not say anything about the house being your primary residence. It only has to be a dwelling.
I am personally in the process of moving to a house I bought earlier in the year before my current home went into foreclosure. My attorney asked if my existing house was my primary residence so I assumed this mean it factored into my non-recourse status. Only after waiting months and chatting with him again did he clarify that your primary residence has no bearing on your recourse status.