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If I allow the property(#1) to go to Foreclosure, will I get a 1099? This could be a bit tricky in that I bought it as an investment property, but then moved (about 20 miles away) into it as a residence so that my kids got into a different school district.
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Here is some info straight from the IRS:
Home Foreclosure and Debt Cancellation Quote:
Update Dec. 11, 2008 — The Mortgage Forgiveness Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualify for this relief.
This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately).
The exclusion doesn’t apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.
The amount excluded reduces the taxpayer’s cost basis in the home. More details. Further information, including detailed examples, can also be found in Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments.
The questions and answers, below, are based on the law prior to the passage of the Mortgage Forgiveness Debt Relief Act of 2007. |
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If I allow the property(#1) to go to Foreclosure, will the 2nd Mortgage come after me
because of the other properties that I have? Or do Anti-Deficiency Laws in Oregon prevent that?
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This depends on just how the foreclosure was done. If only the first mortgage holder note was foreclosed, then the second which is held by the same servicer was removed off of the title for foreclosure purposes.
By doing that they can keep the second mortgage on the books , charge it off and still try to come after you for the money.
Here is a link to the foreclosure law in Oregon
Oregon Foreclosure Law Quote:
Right now I am saving everything that I can
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Smart!