Capital Gains on Commercial Foreclosure Can Be Avoided

[Tom Lackman]

Many commercial real estate investors do not realize that foreclosure on their property will most likely result in being taxed at capital gains rates.  This is because the IRS considers the foreclosure to be a sale of the property to the lender for the amount of the loan balance.  Such investors have said they don't believe it.  How can I be taxed if I just lost my entire investment?  That is because they have depreciated the property and find that the adjusted tax basis is well below the selling price.

Based on my 35 years as a CPA focused on commercial real estate, I know that there are a couple of ways that capital gains can be avoided.  One of course is to stop the foreclosure by restructuring the loan.  I have been hands-on involved in restructuring over $1 billion of commercial real estate loans of all types.  While not always successful, it can be done.  I have also helped numerous investors unable to avoid foreclosure to at least avoid the tax consequences.  It works for some investors, but again not all.

I am available to consult with investors or their representatives in this situation to see if there is a solution for them.  My email is [e-mail] and phone is 971-228-9675.