Amanda B. asked
I need an estimate of the impact on federal and state taxes if I take advantage of a short sale settlement offer from the bank SPS Select Portfolio Servicing. The bank is offering to release their lien for $144,000 on a $1.4M payoff. We originally purchased the property for $370,000 in 2004. Tax documents estimate the market value as $684,000. Some Realtor market comps range from $600K to $800K. Questions include: 1) What is the estimated federal taxable gain for me and my ex-wife? 2) What is the estimated state of NY taxable gain for me and my ex-wife? 3) Since we are divorced but still on the mortgage and deed, will the IRS split the taxable gain such that each of us individually will incur 1/2 of the total taxable gain? 4) If the taxable gain results in us owing a large tax payment to the IRS or state, when and how is it payable, and what are the federal and state penalties for not being able to pay it all? 5) Is the offer too good to be true, considering the home has been upside down for more than 14 years with no payments, and how can we be sure the offer is valid?
December 30th, 2024
Sabrina N. answered
1) and 2) There is no taxable gain from the sale. The sale price of $144,000 is less than the origin...
December 30th, 2024
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