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Double-Whammy For landlords Giving Buildings Back To Lender

Oct 29, 2024 | Posted by Jeff Weil | California Economics, Commercial Financing, Commercial Real Estate, Real Estate Landlords, Trends |

In BizNow 10/23/24 Jarred Schenke’s article warns about the tax exposure that might result from a landlord handing the keys of the property back to the lender. On top of losing whatever equity you may have once had, in addition to all the time and expense purchasing and then managing the property, there may be serious tax consequences by doing a deed-in-lieu-of-foreclosure transaction.  “A borrower hands the property to the lender in exchange for guarantees against legal action or further payments of the debt. For struggling landlords, it’s an appealing option. But debt forgiveness is taxable income, and any loan amount that exceeds a building’s original value — common among CRE owners who have refinanced a property multiple times — is taxed as a capital gain if the debt is forgiven. The capital gains tax rate can reach 37%.” According to CoStar, deed-in-leu transactions make up over 40% of commercial foreclosures.”

 

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Jeffrey Weil, CCIM, MCR.h, SIOR

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  • Jeffrey Weil
  • Colliers International
  • 1850 Mt. Diablo Blvd., Suite 200
  • +1 (925) 279 5590
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Contact Information

  • Jeffrey Weil
  • Colliers International
  • 1850 Mount Diablo Blvd., suite 200
  • CA Lic. 00786195
  • +1 (925) 279 5590
  • jeff.weil@colliers.com
  • www.officetimes.com

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