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Background
1. 1997 Income
Petitioner owned a condominium in Garden Grove, California.
On October 30, 1997, she sold the condominium to the Corps under
the Homeowners Assistance Program (HAP). Petitioner’s mortgage
debt at that time was $147,150.3 HAP is a Federal program,
administered by the Corps, that aids military personnel who own
residences at or near military posts or bases that are being
closed or significantly reduced in size which results in a
significant decline in property values and who are consequently
unable to sell their residences. See 42 U.S.C. sec. 3374 (2000).
Petitioner’s condominium had a current fair market value of
$85,000, and the Corps paid off the amount of the mortgage debt
of $147,150. In short, petitioner compromised the debt by
surrendering property that had a fair market value of $85,000.
The fair market value was based on two appraisals.
For 1997, in addition to her regular Form W-2, Wage and Tax
Statement, the Corps issued petitioner another Form W-2 showing
that petitioner had received income of $62,595 reflecting the
difference between the mortgage debt compromised and the fair
market value of the property surrendered.4 Petitioners disclosed
3 All figures are rounded to the nearest dollar.
4 The record does not explain the difference between the
amount shown on the Form W-2 and the amount of the compromised
(continued...)
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Last modified: May 25, 2011