Short Sales, Foreclosures and Income Taxes: a Summary

Short Sales, Foreclosures and Income Taxes: a Summary If a taxpayer owes mortgaged debt to a lender and the lender cancels or forgives that debt in a short sale or foreclosure, in general the cancelled debt is taxable. However, the canceled amount may be excluded from taxation under the Mortgage Forgiveness Debt Relief Act of 2007. In general, this law allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure or short sale, qualifies for the relief. This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2,000,000 of forgiven debt is eligible for this exclusion ($1,000,000 if married filing separately).

What is an LLLP?

What is an LLLP? Limited liability limited partnership From Wikipedia, the free encyclopedia Companies law The limited liability limited partnership (LLLP) is a relatively new modification of the limited partnership, a form of business entity recognized under U.S. commercial law. An LLLP is a limited partnership and as such consists of one or more general partners and one or more limited partners. The general partners manage the LLLP, while typically the limited partners only have a financial interest. The difference between an LLLP and a traditional limited partnership lies in the general partner's liability for the debts and obligations of the limited partnership. In a traditional limited partnership the general partners are jointly and severally liable for its debts and obligations; limited partners are not liable for those debts and obligations beyond the amount of their capital contributions. In an LLLP, by having the limited partnership make an election under state law, the general partners are afforded limited liability for the debts and obligations of the limited partnership that arise during the period that the LLLP election is in place. Certain LLLP elections take the form of a limited partnership electing to be a limited liability partnership (this is the format used in Delaware, for example) while in other states the election is made in the certificate of limited partnership (examples being Florida, Hawaii and Kentucky). Most states require that an LLLP identify itself in its name, but those requirements are not universal. Because the LLLP is so new, its use is not widespread. Arkansas, Arizona, Colorado, Delaware, Florida, Georgia, Maryland, Nevada, Texas, and Kentucky have all adopted statutes that allow formation of an LLLP, usually as a conversion of an existing limited partnership (the general partners might want to do this to reduce their legal liability). The filing fees of an LLLP vs. a limited partnership are at times higher. In the case of Nevada, the Secretary of State charges $75 to register a limited partnership and $100 to register an LLLP. Additionally, the initial and annual report filing for an LLLP in Nevada is $175 vs. $125 for a limited partnership. Conversely, in Kentucky the filing fee for a limited partnership is no higher if the partnership elects to be an LLLP. LLLPs are most common in the real estate business, although other businesses can also use the form, for example, CNN. There are significant questions about whether the limited liability provided to general partners by the LLLP election will be effective in states that do not have an LLLP statute. States with LLLP enabling statutes[edit] Alabama Arizona Arkansas Colorado Delaware Florida Georgia Hawaii Idaho Illinois Iowa Kentucky Maryland Minnesota Missouri Montana Nevada North Carolina North Dakota Oklahoma Pennsylvania South Dakota Texas Virginia Washington US Virgin Islands Though California does not have a state statute allowing formation of an LLLP, it does recognize LLLPs formed under the laws of another state. While registering an LLLP formed in another state in California will trigger the annual franchise tax of $800—the same as other entities formed in California [1]—the statute[2] governing whether a LLLP must register is somewhat less inclusive than the statute[3] for out-of-state LLCs. Illinois, though not having an enabling statute, does allow formation of an LLLP under RULPA (Revised Uniform Limited Partnership Act).