Alceste
Vagabond
Alas, I wish lenders for commercial properties were allowed the same flexibility by government. Any principal reduction is considered ordinary income,
so both the state & the Fed would take over 40% of it as income tax. Since our predicament is caused of lack of money, there would be no money to
pay the taxes, so restructuring is dang near impossible. Moreover, if the banks take the property, I'd urge them to continue pursuing payment, otherwise
they'd have to 1099 us for the written off debt. Tis as though Obama & Congress actually want a commercial real estate collapse.
Are you saying Obama's administration made up this rule about tax on principal reduction?