Cash for Keys agreement

A

Axsuul_IHB

New member
The house we are leasing was recently foreclosed due to landlord's failure to pay mortgage.. therefore, it was put up for auction in which IndyMac purchased it. They confronted us with a cash for keys deal and we offered to move out for $7,000. I filled out a W-9 form from the bank. Since I will be distributing this money with my roommates, how much should I expect to pay on taxes for this? I am full-time a student so naturally I make under $15,000 a year. Thank you for your time.
 
[quote author="Axsuul" date=1230479975]The house we are leasing was recently foreclosed due to landlord's failure to pay mortgage.. therefore, it was put up for auction in which IndyMac purchased it. They confronted us with a cash for keys deal and we offered to move out for $7,000. I filled out a W-9 form from the bank. Since I will be distributing this money with my roommates, how much should I expect to pay on taxes for this? I am full-time a student so naturally I make under $15,000 a year. Thank you for your time.</blockquote>
I doubt that you'll have much if any tax liability to pay due to your low income. Btw, check your PM.
 
[quote author="Axsuul" date=1230479975]The house we are leasing was recently foreclosed due to landlord's failure to pay mortgage.. therefore, it was put up for auction in which IndyMac purchased it. They confronted us with a cash for keys deal and we offered to move out for $7,000. I filled out a W-9 form from the bank. Since I will be distributing this money with my roommates, how much should I expect to pay on taxes for this? I am full-time a student so naturally I make under $15,000 a year. Thank you for your time.</blockquote>


It is normal income and will be taxed at your marginal tax rate.
 
[quote author="jhammons01" date=1230531923]Did you try to use the $7K as a bargaining chip to buy the house from Indymac?



Just a thought</blockquote>


Call me psychic, but something tells me that a full time student making $15,000 per year may not be able to buy the property.
 
<em>Did you try to use the $7K as a bargaining chip to buy the house from Indymac?



Just a thought</em>



Oh jhammons, that's <em><strong>SO</strong></em> 2005.
 
We tried to get the bank to let us to stay but they were adamant on booting us out. I can understand the landlord's frustration with the house--I believe he purchased the house at $700k but sold it for only $350k. Anyways, anyone in a similar situation can shed light on how much they were taxed? Thanks
 
[quote author="Axsuul" date=1230566834]Anyways, anyone in a similar situation can shed light on how much they were taxed? Thanks</blockquote>


[quote author="awgee" date=1230514131]

It is normal income and will be taxed at your marginal tax rate.</blockquote>


I think you have your answer. Can't get much more detailed that that without filling out your 1040/540 forms. I believe Awgee is a tax professional.



<a href="http://www.irs.gov/individuals/page/0,,id=14806,00.html">Fed tax calculator.</a>



<a href="http://www.ftb.ca.gov/forms/2008_California_Tax_Rates_and_Exemptions.shtml">California tax rates.</a>



You might want to try to get the payment pushed out till after January 1;just remember to set something aside for the following April 15 (unless they already withhold taxes from the payment).
 
[quote author="Axsuul" date=1230566834]We tried to get the bank to let us to stay but they were adamant on booting us out. I can understand the landlord's frustration with the house--I believe he purchased the house at $700k but sold it for only $350k. <strong>Anyways, anyone in a similar situation can shed light on how much they were taxed?</strong> Thanks</blockquote>


Awgee knows more about taxes than most people I know, and he should. He also answered you question here...



[quote author="awgee" date=1230514131][quote author="Axsuul" date=1230479975]The house we are leasing was recently foreclosed due to landlord's failure to pay mortgage.. therefore, it was put up for auction in which IndyMac purchased it. They confronted us with a cash for keys deal and we offered to move out for $7,000. I filled out a W-9 form from the bank. Since I will be distributing this money with my roommates, how much should I expect to pay on taxes for this? I am full-time a student so naturally I make under $15,000 a year. Thank you for your time.</blockquote>
<strong>

It is normal income and will be taxed at your marginal tax rate.</strong></blockquote>


All you need to know is what your tax rate is, and then you can calculate what the taxes are.
 
[quote author="Axsuul" date=1230566834]We tried to get the bank to let us to stay but they were adamant on booting us out. I can understand the landlord's frustration with the house--I believe he purchased the house at $700k but sold it for only $350k. Anyways, anyone in a similar situation can shed light on how much they were taxed? Thanks</blockquote>


It matters not what anyone else was taxed. It is considered normal income and will be taxed at <strong>YOUR</strong> marginal tax rate. Taxpayers pay taxes at different rates because they are in different brackets and have different tax situations. What others pay is irrelevant to your situation. You will pay taxes at your marginal tax rate.
 
[quote author="awgee" date=1230589979][quote author="Axsuul" date=1230566834]We tried to get the bank to let us to stay but they were adamant on booting us out. I can understand the landlord's frustration with the house--I believe he purchased the house at $700k but sold it for only $350k. Anyways, anyone in a similar situation can shed light on how much they were taxed? Thanks</blockquote>


It matters not what anyone else was taxed. It is considered normal income and will be taxed at <strong>YOUR</strong> marginal tax rate. Taxpayers pay taxes at different rates because they are in different brackets and have different tax situations. What others pay is irrelevant to your situation. You will pay taxes at your marginal tax rate.</blockquote>


Just plan on 15%, which should be your marginal tax rate given the income you indicated. The 15% bracket tops at a taxable income of $32K...
 
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