Thank you for using justanswer. Since foreclosures and abandoments reported on 1099A forms are treated as sales for tax purposes, you will have to first figure out if you have a taxable gain from this transaction, and you do that by starting with Form 4797
You will use form 4797 Part III, starting with line 19, where you list the property (stick built rental home for example) the date you acquired it and the date it was sold (forclosed on)
On line 20 you will enter the sale price of $296,426.20,
On line 21 you will enter your cost in the property $280,973.26 plus any improvements you made that are not reflected in that price(such as appliances, landscaping, new roof, kitchen/bathroom remodeling, etc. Also remember to include any expense of sale such as title insurance, sale commission, etc)
On line 22 you enter the amount of depreciation you have claimed on the property during the whole time you rented it.
Line 23 tells you to subtract line 22 from line 21. This is now your adjusted basis in the property.
Line 24 tells you to subtract line 23 from 20. If this is a positive number, then you have a taxable gain on the foreclosure. If you have a negative figure here, you have no taxable gain. In either case you must complete Form 4797 by carrying the gain or loss to line 30 of the 4797, and if its a loss, you carry that loss to your 2008 Form 1040 on line 14.
I have walked you thru the process up to this point to see if you really need to fill out the 982 form. If you had a loss on the foreclosure, then you don't need the form, and you may take the loss on your taxes.
If you had a gain on the forclosure, then you may want to look at Form 982 (Rev. March 2009) . If you are currently in Chapter 11 bankruptcy, you do not need to file this form. I have included a link to the publication that explains how to fill out form 982, but this is a difficult and sometimes confusing form, and so I encourage you to find an EA, CPA or tax professional that is familiar with this form to walk you thru it. Please keep in mind that this form must be attached to a timely filed (including extensions) 1040 form. If this is for any year other than 2008, and you did not file an extension (2008 extension would also be necessary at this point) then you will need to talk to the IRS , or to the
Please see below for more in depth information re: the 981 form
Publication 4681 (2008), Canceled Debts, Foreclosures, Repossessions, and Abandonments
I hope this helps you