Foreclosure Cash For Keys Not Taxable As Service Income

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Foreclosure Cash For Keys Not Taxable As Service Income

Foreclosure Cash For Keys Not Taxable As Service Income

Fortune-

Sometimes it seems the IRS is kicking people when they are down.That is how I saw the case of Karl Bobo who was in Tax Court over a deficiency of $7,175 for the year 2012.

Cash For Keys

The case is about the proper tax treatment of “cash for keys” programs.  Elizabeth Weintraub explains how the programs work in Cash for Keys for Homeowners in Foreclosure.

Cash for keys is a way for homeowners in foreclosure — or tenants living in foreclosed homes — to receive cash in exchange for surrendering the keys and vacating the property. A bank generally reaches an agreement with the occupants of a foreclosed home, which requires the home to be cleaned and left in good condition. The agreement typically sets forth a specific date that the home will be vacated, including a promise from the occupants that they will not: Vandalize the home – Strip the home of light fixtures, appliance or copper – Leave pets behind

That last one about the pets kind of shocked me, but someone I know who cares a lot about animals told me that it happens a lot. Enough so that Elizabeth Weintraub also wrote Why Foreclosed Home Owners Abandon Pets, but I have a tax blog to run here, so I’ll have to move on.

[FORTUNE]

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