Investment Property Foreclosure

[Knucklehead]

What is the name of your state (only U.S. law)? OH

I have a real estate investment property that is headed towards foreclosure. If the bank ends up taking the property, how are the recapture and capital gains (if any) handled? Will the IRS treat it as if I had sold the property at whatever selling price the banks ends up selling it for? I will probibly be filling for bankruptcy as well. How does that effect the situation?

ThanksWhat is the name of your state (only U.S. law)?

 

[FlyingRon]

What the bank sells it for has no bearing on you.

The issue is the amount of the foreclosure sale. Most likely the bank will buy it then for what they have in it.

That will become your sale amount. Your capital gains/depreciation recapture will be figured on that. If there is loan forgiveness that also counts as income.

 

[Knucklehead]

Does including it in a bankcruptcy change how it is handled?

 

[LdiJ]

Does including it in a bankcruptcy change how it is handled?

Not from the "sales" end of things, but it does mean that the cancelled debt would not be income.

 

[FlyingRon]

Bankruptcy would also probably cut off their lines of recourse after the foreclosure.