gain or loss on taxes

[dm415]

Has anybody had to show a gain on your taxes from your foreclosure based on the 1099c or a numbers???

[justbroke]

If you are or were in Bankruptcy or were otherwise insolvent, you get to use both Form 982 under the Mortgage Forgiveness Debt Relief Act (2008). Besides, you have the $250K exemption on capital gains for selling your home.

If you have concerns, you should consult a tax professional.

[dm415]

I forgot to mention it was not a primary residence.

[justbroke]

Well, then you do have to show your realized capital gains because the Mortgage Forgiveness Debt Relief Act, I believe, was specifically for primary residences.

Besides, since it was an "investment" property, you have recapture taxes to deal with as well. I would have a CPA do the taxes. Because mine was a foreclosure on an investment property, I was able to show a loss!

[BobMango]

I had investment property foreclosed on last year before I filed. Like JustBroke I was able to show a loss and got a sizable refund this year.

[SleepWellNow]

I am facing a huge capital gains issue right now on my investment properties. At the time of BK filing (2009), we had 4 rental properties. Since we had applied for loan mods on all 4 properties and all were considerably upside-down, the Trustee did not bother with them. Of the 4 properties, one lender approved a loan mod (although they ran out of time to reaffirm it), one was foreclosed on in 2010, one sold through a short sale in 2010, and the last one will be sold through a short sale in 2011. Our problem comes with the foreclosure and short sale in 2010. Although both were considerably upside-down, we had refinanced them and used the money to improve those properties and purchase the last investment property. According to my CPA, because all the depreciation needs to be added back into the cost basis, we are facing an extremely large capital gains tax due. Adding insult to injury, the 1099c's filed by the discharged creditors (and reported on the tax form 982) wiped out the losses that would of been carried forward. It now looks like our taxes due could be well over $100K. Needless to say, I'm pretty nervous about this. As grateful as I am for the debt relief we have already received through our BK, it's hard to imagine how the government expects an insolvent person be expected to pay all those capital gains.

We are currently in the process of selling the last investment property and our primary residence through short sales. B of A is being very cooperative with these. After our primary residence is sold, we will downsize into the rental we received the mod on. Once this is completed, we will focus on the tax burden. I'm going to look into an Offer in Compromise. We'll see how that goes.

This BK has been quite a journey and I look forward to it being over. With this tax burden, it still may take many years. We've lost our business, our retirement and all our investments but we are more relaxed now than we've been in years. Maybe we're learning to "roll with the punches". LOL! We now take one day at a time and know that better days are still ahead of us.