Author: Carrie B. Reyes

Trustee’s sale terminated ownership before bankruptcy petition filed

Facts: A homeowner became delinquent on his mortgage and the lender commenced foreclosure. A buyer took title to the property at the trustee’s foreclosure sale. Claim: After the sale, the homeowner filed a petition in Chapter 7 bankruptcy seeking to regain title to his home and claiming his bankruptcy petition protected his home from foreclosure. Counter claim: The buyer claimed the trustee’s sale was valid since he purchased the home and held title before the homeowner filed for bankruptcy. Holding: The ninth circuit bankruptcy appeals court held the trustee’s sale was valid despite the owner’s later bankruptcy filing since...

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Joint tenants sharing ownership rights cannot exceed individual deduction limit

Facts: Two unmarried co-owners of two properties claimed separate Federal income tax deductions for their home mortgage interest payments. The co-owners each reported deductions for interest paid on $1 million of acquisition indebtedness and $100,000 of home equity indebtedness. Claim: The Internal Revenue Service (IRS) sent notices of deficiency to the co-owners, claiming they had exceeded the allowable deduction limits on a qualified residence since together their reported deductions exceeded the $1.1 million limit per qualified residence. Counter claim: The co-owners claimed they were each allowed deductions for mortgage interest on up to $1.1 million in mortgage debt, since the limit applied only to individuals or married couples, not co-owners. Holding: A Federal tax court held the co-owners must pay the deficiency amount since they had exceeded their mortgage interest deduction limit as the limit of $1.1 million is considered on a per- qualified residence basis, rather than on a per-taxpayer basis. [Sophy v. Commissioner of Internal Revenue (2012) 138 TC No. 8] Editor’s note – This ruling was made for two unmarried co-owners of a qualified residence, without regard to their unequal tax status as a same-sex couple. When the IRS stands to lose, they are more than willing to treat same-sex couples sharing a residence as a married couple, while not allowing same-sex couples to claim other deductions available to married couples. A disparity of opportunity is...

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Component depreciation barred by standard depreciation schedule

Facts: The owner of an apartment complex claimed individual depreciation deductions on components of the complex’s improvements, including sinks, outlets, paint, pipes, lights and electrical wiring. Claim: The owner itemized the components as tangible personal property, which is not integral to the building’s operation and maintenance. Counter claim: The Internal Revenue Service (IRS) denied the owner’s component depreciation deductions, claiming the separate components the owner listed as non-integral to the building’s operation and maintenance were structural components of the building, and must be depreciated on the applicable 27.5-year standard depreciation schedule (SDS). Holding: A federal tax court held the...

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Equitable easement granted regardless of length of use or lack of monetary compensation

Facts: A property owner purchased an undeveloped, landlocked parcel. The seller and his broker incorrectly told the owner an easement existed allowing access to the property via a driveway crossing an adjacent neighbor’s property. The property owner began to develop his parcel using the driveway. The neighbor accused the property owner of trespassing. Claim: The property owner sought to establish an equitable easement over the homeowner’s property, claiming it was necessary to access his property since it was landlocked and the easement would result in little to no hardship to the neighbor. Counter claim: The neighbor sought to prevent...

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