Foreclosure and income taxes
Date: Sat, 01/29/2011 - 05:50
My mother-in-law turned her mobile home back to the lender. They sold it for much less than it was worth ...sold it for $40K. The balance owed was $56K. She didn't arrange a short sale or anything. Just gave it back. She's now received a 1099A and 1099C. What are her tax liabilities?
The mobile home foreclosure has resulted in a deficient amount.
The mobile home foreclosure has resulted in a deficient amount. I guess the lender has forgiven the deficient balance. As a result he has send her a 1099c form to file with her tax returns. The IRS will consider the deficient balance as your mother-in-law's income and can make her liable for income tax. However, if it was the principal residence of your mother-in-law, then as per the Mortgage Debt Relief Act, she won't have to pay any taxes on the forgiven debt.
