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Bankrupcy and Foreclosure Question

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stephenf

Junior Member
What is the name of your state (only U.S. law)?
California

I file chapter 7 bankrupcy and lost two properties to foreclosure. Now I am being audited and told that I have to pay Federal taxes on both proterties as income? Is this true? I lost both properties in BanKrupcy and did not make any money on them? Please help.
 


FlyingRon

Senior Member
You should refer this to whatever lawyer handled your bankruptcy. There's not enough detail here to tell us what happened.
 

LdiJ

Senior Member
What is the name of your state (only U.S. law)?
California

I file chapter 7 bankrupcy and lost two properties to foreclosure. Now I am being audited and told that I have to pay Federal taxes on both proterties as income? Is this true? I lost both properties in BanKrupcy and did not make any money on them? Please help.
It is necessary to pay federal income taxes on cancellation of debt income. That is the amount of the mortgage that the mortgage company cannot recoup from selling the home.

However, that income can be excluded from income and tax, if it was part of a bankruptcy.

Therefore no, you will not have to pay any taxes on the cancellation of debt income. You will however have to include it on your return the year that you receive the 1099c, and will then have to file for 982 with your return to exclude the income.
 

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