Originally published on Passive Activities and Other Oxymorons on January 24th, 2011.
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CCA 201103045
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.
ID: CCA_2010121214444350
Release Date: 1/21/2011 Office: —————
UILC: 6325.00-00
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.
Showing posts with label HAFA. Show all posts
Showing posts with label HAFA. Show all posts
Thursday, June 12, 2014
Tuesday, June 10, 2014
More On Short Sales- Relocation Grants are For Relocation
Originally published on Passive Activities and Other Oxymorons on January 18th, 2011.
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CCA 201102058
Last month I wrote a post about IRS allowing that a carve-out by a lender for transfer taxes does not create equity in their lien. That burst of generosity is followed this month by even more beneficence. If under the Home Affordable Foreclosure Alternative program, the senior lender provides a taxpayer with $3,000 in relocation assistance, they can actually use that money to pay relocation expenses. The full text of the ruling is below:
In consultation with the Collection experts in Counsel, below is the answer to your question concerning whether the IRS can require a taxpayer to pay the IRS the amount of relocation expenses as a condition of discharge. Recently, the Treasury Department introduced the Home Affordable Foreclosure Alternatives (HAFA) program. The HAFA program took effect on April 5, 2010. Borrowers who participate in a HAFA transaction are eligible for $3,000 in relocation assistance. If the senior lender provides the taxpayer with the $3,000 relocation assistance required under the HAFA program, the IRS cannot require the taxpayer to turn the $3,000 over in exchange for the lien discharge. The HAFA program payment is a payment directly made to the taxpayer to assist in relocation. As such, the relocation payment has no bearing upon the taxpayer's equity in the property under a discharge analysis. Rather, this is just a payment to the taxpayer. Furthermore, under the terms of this program, since this is a required payment as a condition of participation in the program, it would likely be treated as an ordinary expense of sale to be allowed priority despite being reached by the federal tax lien. If a lender provides relocation assistance because the lender believes it makes good business sense and not because it is required under HAFA, the legal answer is the same. The IRS cannot require the taxpayer to pay the IRS the amount of the relocation expenses as a condition of discharge.
I don't know how we are ever going to solve the deficit if the Chief Counsel keeps giving away the store like this.
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CCA 201102058
Last month I wrote a post about IRS allowing that a carve-out by a lender for transfer taxes does not create equity in their lien. That burst of generosity is followed this month by even more beneficence. If under the Home Affordable Foreclosure Alternative program, the senior lender provides a taxpayer with $3,000 in relocation assistance, they can actually use that money to pay relocation expenses. The full text of the ruling is below:
In consultation with the Collection experts in Counsel, below is the answer to your question concerning whether the IRS can require a taxpayer to pay the IRS the amount of relocation expenses as a condition of discharge. Recently, the Treasury Department introduced the Home Affordable Foreclosure Alternatives (HAFA) program. The HAFA program took effect on April 5, 2010. Borrowers who participate in a HAFA transaction are eligible for $3,000 in relocation assistance. If the senior lender provides the taxpayer with the $3,000 relocation assistance required under the HAFA program, the IRS cannot require the taxpayer to turn the $3,000 over in exchange for the lien discharge. The HAFA program payment is a payment directly made to the taxpayer to assist in relocation. As such, the relocation payment has no bearing upon the taxpayer's equity in the property under a discharge analysis. Rather, this is just a payment to the taxpayer. Furthermore, under the terms of this program, since this is a required payment as a condition of participation in the program, it would likely be treated as an ordinary expense of sale to be allowed priority despite being reached by the federal tax lien. If a lender provides relocation assistance because the lender believes it makes good business sense and not because it is required under HAFA, the legal answer is the same. The IRS cannot require the taxpayer to pay the IRS the amount of the relocation expenses as a condition of discharge.
I don't know how we are ever going to solve the deficit if the Chief Counsel keeps giving away the store like this.
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