foreclosure of rental property

"Vijay Sharma" wrote

The amount of the debt on the property.

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.

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

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

Regards,

Mark