Debt For Nonrecourse Debt

824 Words Aug 21st, 2016 4 Pages
Foreclosures and amounts realized from a nonrecourse debt are treated differently as if an individual is not personally liable for repayment. The amount realized includes the full amount of debt before the foreclosure regardless if the fair market value of the property is less than that amount. In doing so, cancellation of debt for nonrecourse debt is inapplicable as the debt is satisfied by the repossession of the property. In terms of mortgage loans, it is critical to understand whether or not the state you are living in is a recourse or nonrecourse state which lenders can (recourse) or cannot (nonrecourse) obtain collections of payments after foreclosure. Nonrecourse debt property that is subject to short sale, foreclosure, or repossessed by the creditor; the succeeding circumstances are treated as a sale of property by the taxpayer. Consistent with, “There are currently 916,449 properties in the U.S. that are in some stage of foreclosure while the number of homes listed for sale on RealtyTrac is 1,105,206” (2016). To truly exemplify the extremes of foreclosures in the United States with regards to, nearly 83% of all homes listed for sale on that specific website are in the process of foreclosure. In hindsight, for the month of July 2016, on average about 1 in every 1532 houses in the United States were foreclosed on.
Discharge of indebtedness is included in gross income yet certain exclusions with regards to the Internal Revenue Code Section…

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