I had a 06 foreclosure & received tax form 1099A. FMV on the house is 8K more than owed. Will I get a refund?
Question:
Answer:
If the bank sold the home for more than the debt, you should have received money when the sale closed. Contact the bank about this.
If the house sold for more than your original purchase price, and you lived in the house for less than two years, you may have some tax owed.
If the house sold for at least the amount of your debt, the bank received the house as full payment of your mortgage, so you have no tax owed on cancellation of debt.
The foreclosure is treated like any other sale for the purposes of determining any gain.
Loss on the sale of a personal residence is never deductible.
If the FMV was higher than the amount owed, you may have a taxable gain for the Cancellation of Debt. COD is treated as ordinary income. However if you were insolvent at the time of the COD, there is no taxable event. You are considered insolvent if your total debts exceed your total assets at the time of the COD.
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