Tax consequences of a foreclosure of property

[reener]

There are tax consequences when your property is foreclosed on and you have "forgiven debt" according to IRS.

But there is relief, here is the link that talks about what they are going to do for this year.

In the past, you would have to claim that "forgiven debt" SOMETIMES as additional income under cancellation of debt depending on your tax situation.

plz review the link.

This is not tax advice but just informational on my part.

http://www.irs.gov/newsroom/article/0,,id=174022,00.html

[twuoo]

Thanks for the link, is there the official link to see which forms needs to be filled out?

[SinkingFast]

Also,......... I believe if you're insolvent at the time the Foreclosure occurs, the forgiven deficiency balance is not tax liable either.

There's and IRS set of standards to prove you're insolvent. That's part of the reason why debt discharged in BK is not tax liable income. If you file BK, you're definitely insolvent.

Something to check on.

[ifly2007]

recently foreclosed on property thinking of BK?

our property was sold on foreclosure auction last monday,negative for about 50K i'm thinking of filing BK if i'll be taxed on for the difference. Does anyone know how much will be the taxes for a $50K? should I file BK? Do i need to wait to receive the 1099 before considering BK? Any response will be a great help.

[HHM]

Keep in mind, you can't discharge the tax in BK if it's too recent. The tax is an income tax and income taxes can only be discharged under certain conditions (i.e. more than 3 years old, etc etc, I forget the exact wording). So if your house was recently foreclosed, the BK is not going to get rid of the tax. You will still need to file Form 982 (I think that is the form number) and claim insolvency to get out of paying that tax.