foreclosure of rental property

Hello,

I tried to get pub 4681 for tax year 2009 but could find only for 2008 so I have a question. If a person forecloses on both his/her residence and on a rental property, I would assume that the foreclosure/disposition of rental property, like in a sale, would be reported on form 4797, correct? If so, what would be the sale price?

Thanks in advance for your help.

Thanks.

Reply to
Vijay Sharma
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"Vijay Sharma" wrote

The amount of the debt on the property.

Reply to
paulthomascpa

Speaking of which, discharge of "qualified principle residence indebtedness" before 2013 will not be considered income under §108(a) (E). The statute says it's "qualified" if it comes under §163 (h)(3) (B), and it's "residence indebtedness" if it comes under §121.

Sounds too simple to me. I checked the regulations and couldn't find anything. Are there pitfalls that I'm not noticing?

Thanks.

Reply to
Stuart A. Bronstein

I actually have a very interesting situation of a client who included the home mortgage in his bankruptcy in a 2008 discharge. So he was living in the home with no further responsibility for the mortgage on the home. Then in 2009 the home was sold in a short sale. I was really concerned that the sale would have a huge Section 1250 gain associated with it for the client (because the basis of the home was reduced to zero on Form 982). I found a CCA (002758) that helped me understand that because the client had no responsibility for the mortgage, the sale did not generate proceeds to him, except insofar as he obtained benefits in the sale. As it turned out, to grease the sale, the lender made an estimated tax payment to the IRS on behalf of the client at the closing (I have no idea how they came up with the figure, out to the penny, no less!). So the client got the benefit of that, plus payment of property taxes. And that's all that is subject to Section

1250!
Reply to
Tom Healy CPA

I believe that the "sales price" is the fair market value listed on the

1099A. The difference between the FMV and Debt is Debt Forgiveness income.

Regards,

Mark

Reply to
Mark Rigotti

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