Received a Form 1099-A After a Foreclosure?

Question:

I received a form 1099-A after our old house was foreclosed upon and after we filed a Ch 7 bankruptcy. The balance of the outstanding principal was $158,494.00 and the the Fair Market Value was higher, listed as $230,000. I've looked over the IRS forms and have even called the IRS and they are just confusing me even more. I was told since the FMV is higher than the amt owed, that I will be claiming a loss, and will not have to pay any taxes. When I try to use TurboTax it asks me to input an amount for cancelled debt. I've read something about $3000 and $1500 depending on how you're filing, but I'm unsure how to figure the cancelled amount. Can anyone point me in the right direction?

Answer:
Publication 544 addresses this topic as I have been searching forever myself. I too called IRS and that was like speaking to someone from another country. (I even asked her to explain it to me as if I were a small child).
Anyway the problem is I have read publication 544 like 10 times and I dont get it. Funny thing is I know my end result will be "$0.00" because at one point I read and understood that you cant claim a loss on a forclosure. I am like you where as the FMV is more than the amount owed.
Anyway maybe this will help you a little. If it makes sense to you maybe you can explain it to me.

Received a Form 1099-A After a Foreclosure?

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