Comments on: “Lawyer advises foreclosed clients to break back into their homes”

By: Bill Poser

Bill Poser — Thu, 20 Jan 2011 06:20:33 +0000

Reuven@I think that you are confusing “forgiven mortgage debt”, which does constitute income of a sort in that money that was originally lent is converted into a gift, with “funds not spent paying one’s mortgage”, which do not constitute any sort of income since the loan remains a debt.

By: Reuven

Reuven — Thu, 20 Jan 2011 05:16:56 +0000

@David: I presume it’s twisted logic like yours that led to the passage of the “Deadbeat Specu-vestors Tax Relief Act”, the outrageous bit of legislation that exempts forgiven mortgage debt from income tax. (http://www.irs.gov/individuals/article/0,,id=179414,00.html).

I wish I could pay myself in forgiven debt and not be taxed; but in this country hard work and thrift is punished, while deadbeat spendthrifts are lavished with tax handouts and benefits.

By: David Schwartz

David Schwartz — Wed, 19 Jan 2011 18:50:13 +0000

Robert: You pay your mortgage to do two things. One is to acquire equity in your home. The other is to pay interest to the lender.

If you aren’t paying your mortgage, you aren’t accruing equity in your house. So there’s no “imputed income” from the equity.

The interest you pay to the mortgage holder compensate them for the loss they took by tying up their money to buy you a home at a historical price rather than the market price as you lay out your money. You aren’t getting that benefit, since you will never get to own or sell the house. In fact, that benefit doesn’t exist for anyone since the house dropped in value. So there’s no “imputed income” from forgiven interest.

A foreclosed mortgage on a house that has dropped in value is a loss transaction all around. Nobody will make any income from it.

By: Chris

Chris — Tue, 18 Jan 2011 22:34:40 +0000

I usually charge $650 but I will take whatever you have on you.

By: Robert

Robert — Tue, 18 Jan 2011 20:18:44 +0000

I always thought people that were not paying their mortgage should be taxed on the “imputed income” of what their mortgage should be (even if they argue that shoddy paperwork makes it difficult to identify who the appropriate lienholder is.)

So that lawyer isn’t that far off base with his “with the money you’re saving” argument.

Of course, when trying to make a living from deadbeats, you need to insist on cash up front before doing any work.