I filed for bankruptcy in 2009 which included several investment condos in Florida. As part of the bankruptcy the condos were surrendered. The banks have since foreclosed on all the properties except one. The last condo that I still hold title to I am are considering doing a quitclaim deed and signing it over to the condo association for past due assessments. Is there any tax liability if I do the quitclaim deed?====> The type of deed you use to transfer a property generally doesn't have any impact on your taxes ;it's why you're deeding it and what you get from it that matters. When you transfer property using a quitclaim deed, you legally walk away from any rights that you have in the property, whether or not you actually have any.However, A quitclaim deed is not a means of avoiding back property taxes. If you owe property taxes, the tax must be paid by ypu who wish to transfer ownership. The grantee who accepts interest in the home, cannot establish clear title until the back taxes have been paid. This is because the tax jurisdiction still has a right to place a claim on the property. Such a claim can nullify a quitclaim deed. If the grantor, or the person who gives up interest in the property, pays the tax due before the quitclaim deed is challenged in court, the grantor still maintains interest in the property. A quitclaim deed also cannot be used to avoid a federal or state income tax lien. Once a grantee accepts a property, he inherits the responsibility of paying the property taxes. The grantor no longer is obligated to pay tax on the property A quitclaim deed merely transfers the claim you have on the condo to someone else. It does not transfer responsibility, though, for any liabilities against the property such as tax liens or mortgage loans. If a lien was placed on the property before the quitclaim, then both owners are responsible for settling the lien and any penalties from it. If you signed the mortgage note, you are still liable for paying back the note and may also continue taking interest paid on the note as a deduction on your federal income tax. Property tax, however, is the responsibility of the owner of the property. So, while you are still liable for any outstanding property tax owed, upon filing the quitclaim the you are no longer liable for any future property tax on the condo.
The value of the condo is 100K.
The association is also in the process of foreclosing on the property. If the forclosure goes through, would there be any tax liabilities? I am trying to figure out if I should do the quitclaim deed or let the condo continue in foreclosure.=====>> on quitclaim deed choice as said previously; however, if you let it continue in foreclosure, then The IRS looks at rental properties differently than it looks at your personal residence For taxpayers realizing foreclosures on personal residences, the law was changed so that in most cases a taxpayer will not have to recognize and pay tax on forgiven debt. These rules don't apply if the property is a rental foreclosure. When your rental property gets foreclosed on, and you're responsible for your loan, your lender may forgive your remaining balance. If the lender does this, it won't affect your capital loss write-off. However, the IRS may treat the loan forgiveness as regular income. If your loan doesn't qualify for the qualified real property business indebtedness exclusion, you'll have to pay regular income tax on the amount of the loan that gets written off. To qualify for the Qualified Real Property Business
Indebtedness exclusion, the debt must be ?qualified real
property business indebtedness;indebtedness which
Was incurred or assumed by you in connection with
real property used in a trade or business and is secured by
such real property I mean indebtedness incurred
or assumed to acquire, construct,
reconstruct, or substantially improve
the property;was incurred or assumed before Jan 1, 1993, or if incurred or assumed on or after such date, is qualified acquisition indebtedness, and With respect to which such taxpayer makes an election to
exclude the income. If you qualify for this exclusion Ordinary income from cancellation of debt equal to
the outstanding principal amount of debt owed minus the
fair market value of the property; then I mean the COD income is excluded from gross income and applied, instead, to reduce
your adjusted basis of the property. If the property is being used as your principal residence, then the principal residence
exclusion applies. If the property was previously your
principal residence, but has subsequently been converted to rentaluse, then the QRPBI exclusion applies.