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Show COon&AT nttXGTW TNIOUGM lOCiSTKS What's happening In sports iii ii if i i i a r 4 Please see Page B6. Hilltop Times June 21, 1991 mm Jt i If, L " J tSFr5SS,. -- 1. l? -- ' . 5 Keeping the wolf ft door DlnXB Revenue Service in accordance with IRS regu- by Rudi Williams lations." American Forces Information Service A senior military officer who sold his home a few years ago recently wrote to the Department of Veterans Affairs inquiring about his current eligibility for a guaranteed home loan. The response was a shocker. "You are indebted to VA in the amount of $18,900, plus interest," the VA letter said. The people who bought the officer's home defaulted, the bank foreclosed, and VA had to make good on its loan guarantee. Taken aback, the officer immediately requested a waiver of indebtedness under the Veterans' Benefit Amendments Act of 1989. "No one told me the guy I sold the house to had defaulted on the loan and the property had gone into foreclosure neither VA nor the lender," he said. Waiver upon request Under the act, veterans are not liable for debt foreclosures on loans made after Jan. 1, 1990, unless there is indication of fraud, misrepresentation or bad faith. Holders of older loans, such as the stunned officer, can request a waiver based on the law. Veterans can also request reconsideration of indebtedness for VA benefits overpayments and home loan debts for which waivers had been VA-guaran-te- ed denied. VA's next letter made the officer happy: "The debt has been cleared, and no further action is required by you," it read in part. Less than a But his happiness was short-livemonth later came another letter, another shocker: d. "You are reminded that a discharge of indebtedness, such as a waiver, is considered taxable income and must be reported by you to the Internal Revenue Service. A report of this waiver will be provided by the Veterans Administration Best Dad Son takes new name to the Internal VA and IRS officials confirmed the letter was real and not a mistake. Depending on the circumstances, the officer may have to pay taxes on money he has never seen. "Whether or not forgiven mortgage debt constitutes taxable income is extremely complicated," an IRS spokesman said. Every case is different, and the tax service considers each on its various facts and circumstances, he explained, adding the best advice IRS has for taxpayers in this situation is to seek the help of an experienced professional tax preparer. Original owner still responsible The officer found himself in financial straits with VA and IRS because he let a seemingly trustworthy veteran assume his home loan, but he didn't obtain a release from liability from the lender and VA. Without such a release, the original owner is technically responsible for the property if his buyer defaults. VA spokesman Bonner Day said thousands of veterans and active duty service members have experienced the same problem, and many of them were unaware of the waiver law. He emphasized that VA tries to contact original owners, but such efforts are often fruitless because military people move freVA-guarante- ed quently. "VA has always had a waiver program, but Congress liberalized the rules beginning in December 1989," Mr. Day said. "In April, May and June 1990, there were 11,158 loan liquidations; in July, August and September, 9,948 liquidations; in October, November and December, there were 8,660; and in January and February of 1991, there were 5,316 liquidations. Waivers of indebtedness are not granted automatically: "In fiscal 1989, 13,796 waiver requests were considered and 2,734 granted. In fiscal 1990, 14,246 news How to get needed help (oJDIl were considered and 8,150 granted," Mr. Day continued. "In determining whether to grant a waiver, the veteran's degree of fault and financial situation are considered. Waivers are generally denied to veterans who make no effort to pay the debt and who insist on just walking away from the debt even though they may have financial resources. When VA rejects a waiver and the veteran can't pay, the first target of the collection process is income tax refunds. Military pay and retirement pay may be targeted; Social Security payments are not taken, Mr. Day explained. There is an appeal process. "After appeals are exhausted at a VA regional office, a waiver request may be appealed at the Board of Veterans Appeals and ultimately, the Court of Veterans Appeals," Mr. Day said. "When VA contacts an original homeowner concerning a defaulted home loan, it's for the purpose of urging the original homeowners and the new owner to work together to make good on the mortgage," Mr. Day said. "The initial goal is to reinstate the loan, not to urge foreclosure," he said. The waiver is an option only when there is no hope the loan will be made good and the property is hopelessly lost to the current and previous owners. Obtain a release He said the moral of the story is: Don't allow anyone, even a trusted friend, to assume your home loan without getting a release from liability from VA and the mortgage holder. The IRS spokesman said tax publications outlining the ins and outs of selling a home include: Publication 523, Tax Information on Selling Your Home; and Publication 544, Sales and Other Dispositions of Assets. They're available free from IRS by calle or by writing to: Intering nal Revenue Service, P.O. Box 25866, Richmond, Va. 23289. VA-guarante- ed toll-fre- Quality AFLC wins award |