Hello and thanks for trusting me to help you today. I am a tax advise with over 15 years of experience.If you mean the judgement amount, unfortunately no. The income was never in your taxable income so it cannot be subtracted out.The IRS generally treats a contract for deed as a sale, which means the buyer has the tax benefits of ownership. Thus, the payments of interest that are made by the buyer in possession are deductible as “mortgage interest,” even though the buyer does not have legal title to the property. A contract for deed seller must report the transaction as an installment sale on form IRS Form 6252. Once sold, the seller cannot claim depreciation or any other tax benefits of the property. If the buyer defaults on the contract and the seller exercises his legal option to reclaim the property, the tax code treats the transaction as a foreclosure.
If you repossess your property after making an installment sale, you must figure the following amounts.
Your gain (or loss) on the repossession.
Your basis in the repossessed property.
You would want to make sure you are familiar with this by looking to IRS publication 537 under repossessionshttp://www.irs.gov/publications/p537/ar02.html#en_US_2012_publink1000221736
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