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Me and my husband purchased a condo in April of 2005 for around 267000.00. Unfortunately we were one of the many families that had to foreclose in October of 2007. We recently received a form (the exact name doesn't come to mind at this moment) in the mail stating that the property was bought for around 75000.00. Are we still obligated to pay taxes on this property? This would literally break our bank account and practically force us to go from being renters to practically homeless.
State/Country relating to question: California Already Tried: We haven't tried anything. This is our first time reaching out to a professional with knowledge in this area. We are going to have our taxes prepared this week and want to know what to expect in this area.
Hello cko,Was this condo used as your primary residence?When you ask about paying taxes on the property, are you referring to property taxes?
Yes. The condo was our primary residence. Yes, property taxes.
Hello againCustomerAs far as property taxes on the condo, once the bank took possession of the condo through foreclosure, the property taxes then became the responsibility of the bank. Since you went through a foreclosure on this home, you more than likely received or will receive either a 1099-A form or a 1099-C form from the bank which would report the amount of debt which was cancelled or forgiven. Normally you would be responsible for taxes on the amount of this forgiven debt, as the IRS views this as income to you.However, due to the recent mortgage lending crisis in this country, Congress enacted temporary legislation which allows taxpayers who go through a foreclosure on their primary residence, to exclude this cancelled debt from their taxable income. This is part of the Mortgage Forgiveness Debt Relief Act and applies to foreclosures that occur on your primary residence between 2007 and 2011. So as long as this condo was used as your primary residence, you would also owe no taxes on the debt forgiven by the bank.If this was helpful please press the Accept button. Positive feedback is also appreciated.Thank you ck
Accountant
25+ years tax consulting. Specializing in returns for US citizens living abroad
Whew! Your response brings me such relief. Thank you so much for sharing your knowledge. This is my first time using this site and you can rese assured that I will be using it again. Once again, thank you:)
Thank you ck and let me know if you have more questions