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It depends on what type of property is it. Is it your personal residence?
If bank foreclose on your main home, you may have a loss or gain, depending on your purchase price, major improvements you done, your mortgage and current fair market value of the property. While losses are not deductible, gain is usually taxable. You will receive 1099A from the bank to help you to determine your gain or loss. If your mortgage is more than the fair market value of the property, bank usually cancel the outstanding debt and issue you 1099C. Currently the canceled debt is considered a taxable income to you.
If the foreclosed property is your business or rental property, the foreclosure is treated differently. The property is treated as sold and you claim gain/loss from disposition of business property. If bank cancel the outstanding debt, you can exclude it from the income.
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