Upcoming Foreclosures

After complete foreclosure,Bank owned What are the Tax consequences or are they forgiven ?

Public Comments

1. Review your loan paperwork. Many people have 2 loans (80/20), one of which is non-recourse (the 80) and the other is recourse the 20). A bank with a Non-recourse loan is stuck with the house. The report the loan as gone on a 1099-A. The "sales price" to be used on the schedule D is the loan balance. There is no cancelled debt. A bank with a recourse loan can sue for the shortage. They can give up trying to get the money. They may issue both a 1099-A and a 1099-C or just a 1099-C. The "sales price" is the fairmarket value of the house (or the balance on that first loan if it was more). The shortage is cancelled debt and must be covered on the tax return. If the cancelled debt was use to buy/build/remodel the home and the cancelled debt was in recent years, you may be automatically eligible to use form 982 to exclude the debt from income. If the cancelled debt was money used for credit card, tuition or cars (non house debt), it is only eligible for form 982 if you are in bankrupt or insolvent. See IRS pub 4681.