Originally published on Passive Activities and Other Oxymorons on January 24th, 2011.
So here is another bonus post. Last week I did a post on CCA 201102058. It concerns relocation grants under the HAFA program. As I understand the program a senior lien holder can pay an upside down property owner up to $3,000 in relocation assistance to facilitate a short sale. The CCA indicated that the IRS cannot require that this money be turned over to them as a condition of releasing their otherwise worthless lien.
CCA 201103045, which I reproduce in full below explains that the position on relocation assistance is similar to the position that was first enunciated in PMTA 2010-058. In that statement they discussed carve outs for transfer taxes, which also do not create equity.
Over the weekend I received an e-mail from someone whose short sale was being hung up because of this issue. I have yet to see any other commentary on it.
Release Date: 1/21/2011 Office: —————
From: ———————————- Sent: Sunday, December 12, 2010 2:44:46 PM To: ———————————- Cc: ———————————- Subject: RE: opinion
It's not really the same situation although the result is the same - i.e., they should not include the payment in computing the Service's interest in the property. The October IG [interim guidance] memo deals with carve-outs to junior lienholders from money that would otherwise go to the senior lienholders. The relocation assistance is not part of the sale proceeds, it's just a payment made directly to the taxpayer and, as such, is not part of the taxpayer's interest in the real property to be discharged from the lien. A new IG memo on this will be coming out soon.
If you have a short sale that is being hung, you may have to wait for the "new IG memo" to percolate through collection, but it might be worth referring to the Chief Counsel Advice. If this ends up being helpful, I'd appreciate you posting a comment on this blog.