Our client was a family real estate business held as a partnership. The family members were all married and did not want the spouses of each partner to take over if one of the partners died.
Our client owned several farms outside of the Chicagoland area which when purchased in 2005, at the peak of the market, having values in excess of 5,000,000. The client took a loan for half the value of the property (Approximately 2.500,000). The loan was an interest only loan and our client made every payment in due course. In 2008 the bank appraised the farmland and its value had decreased to 1.5 million
Despite the fact that the client owned other properties free and clear of any obligations we were able to negotiate a deed in lieu of foreclosure. Now while the client received a $1,000,000 forgiveness of debt, this debt was reported to the IRS. Having worked the deed in lieu of foreclosure agreement with the client’s CPA our client used the debt forgiveness to his advantage as he had tax losses to offset the forgiveness. A WIN-WIN for our client and his family.