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If your property goes into foreclosure, can you claim that

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loss on your federal taxes....
if your property goes into foreclosure, can you claim that loss on your federal taxes.
Submitted: 2 years ago.Category: Tax
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11/2/2015
Tax Professional: emc011075, Tax adviser replied 2 years ago
emc011075
emc011075, Tax adviser
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Hi. My name is ***** ***** I will be happy to help you.

It depends on what type of property is it. Is it your personal residence?

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Tax Professional: emc011075, Tax adviser replied 2 years ago

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.

Let me know if you have any questions.

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Tax Professional: emc011075, Tax adviser replied 2 years ago

I see you read my respond. Do you have any questions? Is there anything else I can help you with today?

And if this answered your question, please take a moment to rate my response so that I may receive credit for assisting you today. However, if you need clarification, or want to discuss this issue further, let me know. Thank you.

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