Cancellation Of Debt - COD
First you receive the good news that your credit card debt or part of your mortgage has been forgiven and you no longer have to make any payments. Then the bad news arrives. The amount forgiven is taxable. According to the IRS, a cancellation of debt (COD) is taxable income even though you didn't receive actual cash. You would receive a Form 1099-C, Cancellation of Debt from the lender or whoever forgave your debt, and this amount will be reported to the IRS.
Let's say Frank could no longer make mortgage payments on his loan, so it is foreclosed by the bank. Frank bought the house for $100,000 and made $5,000 worth of principal payments, but today the house is only worth $80,000. So Frank will receive a Cancellation of Debt Form 1099-C from the bank for $80,000 that he needs to report as income on his taxes.
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Finance: What is a second mortgage?4 Views
Finance allah shmoop What is a second mortgage Okay you
know what a first mortgages it's otherwise cleverly named what
is called it is called oh yeah Mortgage it's Just
a loan on a house You paid four hundred grand
for this baby Hundred grand down two hundred fifty grand
in a first mortgage And they're still fifty grand You
owe well where's that fifty large coming from the bank
wouldn't loan you any more on a first mortgage that
was costing you six percent a year Tio you know
to rent that money So you had to get a
second mortgage which should things go awry and you become
a statistic Well that's it's fully behind the first mortgage
in the priority stack of payback So in a bankruptcy
situation the first mortgage first what's called a first mortgage
get it fully paid along with any fees associated with
it and back interest accrued and any other things that
are associated with that first mortgage it stands in line
first in priority Then any cash leftover gets attributed to
that second mortgage So not surprisingly second mortgage money costs
a lot more to rent then first mortgage money because
the risk of non payment in a bad situation is
meaningful E higher especially when the borrowed does this for 00:01:25.136 --> [endTime] a living
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