How do I report a Form 1099-A for my foreclosed home?
Treat a foreclosure as a sale of the property. Report the sale on Schedule D. The sales date would be the date the foreclosure became final (reported on Form 1099-A, box 1).
What you'll report as the amount realized on the sale depends on which of these applies:
If you were personally liable for the loan. This is called a recourse loan.
If you weren't personally liable for the loan. This is called a nonrecourse loan.
On a recourse loan, the amount realized on the sale is the lesser of:
The outstanding debt right before the foreclosure. Subtract any amount for which you remain liable right after the transfer.
The fair market value (FMV) of the property transferred
You compute gain or loss in the usual way. This is the sales price minus your adjusted basis in the property. If there's a loss on the sale, you can't deduct the loss, and it can't be used to offset other income. This is due to the fact that your home is considered personal-use property. If you have a gain on the sale, you might be able to exclude some or all of the gain.
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This advice is for general information purposes only and may not apply to you. Every tax situation is different. This is not intended to be legal advice. Taxpayers should consult an H&R Block Tax Professional regarding their individual tax situation.