My client had his house foreclosed in 2004 after missing only 1
> payment. He got a Form 1099A showing principal owed of $50K (his
> original basis) and an FMV of $220,000. He did not, however, get the
> difference from the mortgage company. He is single and the house was a
> qualified principal residence as he had lived there the past 4 years.
> He sued the mortgage holder and won a summary judgment in 2006,
> receiving a check for $165,000 (after attorney fees). I am using a
> Form 8275 with his tax year 2006 return showing his $165,000 to be non-
> taxable income as it relates to sale of a qualified principal
> residence in 2004 that had an exclusion of up to $250,000. I have not
> yet filed either 2004 or 2006 return yet. Is there another way to
> handle this non-taxable capital gain?
>
> (The NAEA tax research service wants $225 to research this question as
> they say it is a complex tax issue).
>
From your facts and circumstances above, I think you have it nailed down just right. (But after missing only one payment?)
And certainly use the form 8275 to "cover your ass....ets".
ChEAr$, Harlan Lunsford, EA n LA