Foreclosures, Deed-in-Lieu, Short Sales

Foreclosures, Deed-in-Lieu, Short Sales

FORECLOSURES - Disposition under FIRPTA

1. Subject to tax on any gain resulting

2. Transferee (buyer, bank, lender, etc) is responsible for withholding

3. FIRPTA rules differ from rules for other dispositions

4. If trustee on date of transfer notifies the court and IRS and there is a loss, which there usually is, the withholding could work out to ZERO.

Deed-in-Lieu - Disposition under FIRPTA

Debtor simply transfers over the title to the creditor.

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Amount realized is the amount encumbering the USRPI plus any additional amounts paid to the debtor.

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No withholding or FIRPTA tax if:

•Transferee is the only person with a security interest in the USRPI

•No cash or other property other than incidental fees is paid.

•Notice requirements (same as Foreclosure) are met.

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Short sales - Disposition under FIRPTA

Sale of a property at less than the mortgage outstanding, with permission of the lender. Net proceeds not payable to Seller.

1. Subject to tax on any gain resulting under FIRPTA

2. Transferee (buyer, bank, lender, etc) is responsible for withholding

3. FIRPTA rules differ from rules for other dispositions

4. Prime candidate for reduced withholding certificate at closing because, the withholding could work out to ZERO.

5. In cases FIRPTA withhelding was sent to IRS then prime candidate for a full refund.