Think you are at rock bottom when your house is foreclosed on? Think again.
All I can say is "Wow". I have been reading on dkos for a while now and have written very little. This article has pissed me off so badly that I had to write something. Read the following blurb from an article in the NYTimes and you will see why.
Two years ago, William Stout lost his home in Allentown, Pa., to foreclosure when he could no longer make the payments on his $106,000 mortgage. Wells Fargo offered the two-bedroom house for sale on the courthouse steps. No bidders came forward. So Wells Fargo bought it for $1, county records show.
Despite the setback, Mr. Stout was relieved that his debt was wiped clean and he could make a new start. He married and moved in with his wife, Denise.
But on July 9, they received a bill from the Internal Revenue Service for $34,603 in back taxes. The letter explained that the debt canceled by Wells Fargo upon foreclosure was subject to income taxes, as well as penalties and late fees. The couple had a month to challenge the charges.
Apparently, if you are merely foreclosed upon and do not file for bankruptcy the IRS will classify the loan forgiveness as income and tax you on it. It gets worse...
Mr. Doherty, the Stouts’ lawyer, pointed out that the acquiring lender, in this case Wells Fargo, has some leeway in valuing a house. The fair market value can be the high bid at a sheriff’s sale, or an alternative valuation.
In this case, Wells Fargo’s about-face was tied to an appraisal that Mr. Doherty says he believes was completed before the sale. It set the value of the house at $132,844, eliminating the Stouts’ liability. (Lenders do periodic appraisals once a property is in default, Mr. Doherty said.)
The Stouts found in county records that Wells Fargo had sold the house to U.S. Bank for $106,000 — the same amount Mr. Stout had owed — in March 2006. The house was resold that month for $140,000.
So basically Wells Fargo got it's money and U.S. Bank made $34,000 on the sale of the home. But Mr. and Mrs. Stout get a tax bill for $34,600. Can someone please tell me why I should be anything but pessimistic when I look at the condition of our economy and the way common citizens of this country are treated. We are all becoming indentured servants to the wealthiest 5% of this country. I liken it to the migrant workers that pick our fruits and vegetables. They may get paid minimum wage but they are charged outlandish prices for the food and shelter they are provided by the employers. They end up at the end of the day owing money to their employers (plantation owners).
Granted the tax bill can be rescinded by declaring bankruptcy but with the bankruptcy bill that was passed a couple of years ago that has become harder to do as well as more expensive. Does anyone here think it is a coincidence that bill was passed based upon the current situation? Me thinks not.