For struggling commercial property owners, loan modifications can be answered prayers, but without proper tax planning, all hell may break loose come April 15, 2010.

That’s because income from debt cancellation is taxable, something that is often overlooked as owners scramble to ward off financial ruin. Uninformed real estate owners could find themselves in financial peril when they file their IRS tax returns and owe hundreds of thousands of dollars in unexpected taxes they cannot afford to pay.

Consider the big picture: Commercial loan defaults are posting record-high rates — and momentum is moving toward worsening default rates in 2010. Real Estate Econometrics expects the default rate to rise to 5.2 percent by the end of 2010.

All this means heightened possibilities for commercial lenders working with overleveraged property owners to forgive a debt rather than waste more resources chasing insolvent borrowers. [more]