bankruptcy taxes discharge
How is capital gains tax calculated when the house is sold in foreclosure?
I’ve two rental condos foreclosing in a few months. One of them should have a capital gains exemption because I used to live in it and moved out of it in July of 2006. My questions: 1) what is the percentage used in calculating capital gains tax on rental homes foreclosed? 2) I might have to file for bankruptcy also in the next few month. Will a bankruptcy discharge cancel the capital gains tax? 3) What records do I need to give to the IRS next year?
Thanks so much.
These would be recourse loans. You treat the 1099-A as if it was a 1099-S for the amount that equaled the FMV of the property (or loan balance if less). You fill out the 4797 as normal.
You cannot exclude any gain from depreciation. Any other section 121 exclusion goes on line 2 of the 4797.
if the loan was more than the FMV, you will also have cancelled debt income when the 1099-C is issued. You add that as rent to your schedule E unless you have completed bankruptcy or are insolvent.
You are also assuming you actually have a gain. You may have a loss…but the loss may be limited.
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