Tax Costs of Mortgage Default

Pete Oppenheimer

Journal of Real Estate Practice and Education, 2011, vol. 14, issue 1, 1-17

Abstract: This paper contains a discussion of the tax consequences to a mortgagor from foreclosure and subsequent cancellation of mortgage indebtedness by the mortgagee. Most likely, many mortgagors are unaware that default on any indebtedness exposes them to a potential tax on the deemed income. As shown in this paper, the tax consequences from foreclosure pose a significant cost that should be evaluated when making a decision to default on a mortgage. Also, several options available to a taxpayer to exclude the debt cancellation from income are discussed.

Date: 2011
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DOI: 10.1080/10835547.2011.12091682

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