Cod Income Tax

[Brac]

s About Taxes)/COD income tax Advertisement Expert: Glenn D Schnabel - 9/7/2008 What would the federal income tax liability be on my following scenario/rental property never used as primary residence:

1. basis in property 190,000 purchased in 2004)

2. owe 2 mortgages on property totaling 415,000

3.  short sale 200,000 in 2008

we took out the equity to buy other property so we owe 415,000 on this home worth 200K.  when the market tanked, all the equity disappeared in this and in the other properties.  

will we owe income tax on $215,000?  the COD?

[Willaburh]

Regina,

Thank you for your question.

1)will we owe income tax on $215,000?  No See Below

The short sale would be:

Mortgage    $($415,000)

Sales Price  $200,000

Remaining    ($215,000)

Adjusted by:

Cost of Property $190,000

Less depreciation taken( ?)missing information

Adjusted Basis   $190,000 less ?

For tax purposes you can reduce the debt by tax attributes.

You need to reduce the cost of the two properties by the depreciation taken , allowed or allowable.

2) the COD?

The Cancellation of Debt $215000-$190000 = 25,000 plus the depreciation Hope this is helpful.