Taxes and a mortgage mess this year – Money & Services

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Hi,
About three years ago we refinance our home, and took some cash out to pay bills mainly student loans. Sounded like a good deal at that time, well it was one of those inflating rates.. we tried to refinance and found out that we owed allot more then the place was worth. We talked to a realtor and he advise that the way over inflated the value of condo. We hired on attorney and discovered they forged the value and our income. He gave them the opportunity to refinance our home at today’s value or else court time, plus but the interest charges towards the equity of the home. The mortgage company did that with out any question, they told us they will “eat the difference” this was about 56k they “ate”. There was no discussion of tax during this. Will we get at W-2 for this, how ugly will it be during tax time. The lawyer fee was 5k for this. We live in Ca.
additionally
know some one talked about being insolvent at the time. Right before our assets was about 197,000, including furniture, cars, savings/retirement, and other misc stuff. Our debts were about 220k before this. How would someone claim this difference.
thanks for you

Answer

You cannot claim the insolvency on your taxes.

You MAY get a Form 1099-C from the mortgage company. If so, go back to the mortgage company and have them revoke it, because, In my opinion, the resultant difference in the interest charges ($56K) was a result of THEIR malfeasance.

For this reason, you should not be held responsible for the taxes. However, if the IRS gets a Form 1099-C, they will not look at it that way.

I would be pro-active on this and contact the lawyer to have him work on your behalf in this issue.

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