Full question:
My partner's mother loaned us money to refinance our mortgage several years ago. We hold title as joint tenants. She is now dying, and my partner is her sole beneficiary, so she will inherit the note, along with substantial other assets. If she declares the note 'paid in full', will I owe any tax on my share of the outstanding balance, under the debt forgiveness rules? We are not married. If so, and we don't want to pay the taxes, can we leave the note in place as is, or do I have to refinance my share giving my partner a new mortgage note?
- Category: Real Property
- Subcategory: Mortgage Satisfaction
- Date:
- State: California
Answer:
Imputed income is a term the Internal Revenue Service (IRS) applies when they feel that the value of a benefit or service should be considered as income for the purposes of calculating your federal taxes. For example, if you have a contract with the other owners requiring them to pay a share of the expenses and you forgive their indebtedness, it may be counted as imputed income on the other owners' taxes as a cancelled debt. The answer will depend on all the circumstances involved, such as whether you were named in the will and whether the loan was secured. We suggest you consult your accountant who can review all the facts and documents in your situation.
Please see the information at the following link:
http://www.irs.gov/taxtopics/tc431.html
This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.
