Assessor candidate faces big IRS tax

COEUR d'ALENE - County Assessor candidate Larry Spencer has $448,709 worth of federal tax liens filed against him in Bonner County.

"If I would have thought about this, I would have settled this and paid it off before this came out," Spencer said Friday afternoon. "I imagine I can get it settled and paid off before the general election."

Spencer, a longtime Republican who is running as a Democrat, said the liens are related to several of his properties that were foreclosed upon during the past few years.

"It's not like I earned that much money," Spencer said. "But when you have a mortgage and you are foreclosed on, the IRS treats that amount like income."

According to the TurboTax website, when a foreclosure includes a cancellation of debt, the debtor has an obligation to report it as ordinary income if he or she is personally liable for the entire mortgage, despite the security interest the lender may take in the property.

In Spencer's case, he said, he lost several properties to foreclosure. He said the properties were valued in the millions.

"It's a catch-22," Spencer said. "If you lose your house and didn't structure your mortgage right, you are on the hook for it."

He said the Internal Revenue Service has a settlement process where it takes into account the debtor's assets and ability to pay the lien down.

"I am sure I can get this settled out for a lot less," he said, adding that he hopes to clear up the liens as soon as possible.

"But I don't know how long their settlement process takes," he said.