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Randalltax, Enrolled Agent
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What is income tax treatment if the County closes on a rental

Resolved Question:

What is income tax treatment if the County closes on a rental property for back taxes and then the property is reacquired by the same owner in the tax auction? Is it like a stock wash sale? Assume amount paid in auction is not expensed as property tax but added to basis.

Submitted: 1 year ago.
Category: Capital Gains and Losses
Expert:  Randalltax replied 1 year ago.


Randalltax :

You have two separate ownership transactions. When the county foreclosed and took the property, the property is considered to have had a "sale". You must calculate your gain or loss based on the "sale" amount and the cost basis.

Randalltax :

The sale amount is equal to the amount of debt forgiven, or in this case, the amount of back taxes it paid off.

Randalltax :

When you purchased at auction, you started as though this were any other newly acquired property.

Customer :

Thanks

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