My house was foreclosed on last July. I just received a tax notice from the bank who had the mortgage. It is a 1099C stating that the discharged debt was $90,000 even though the house sold for 450,000. Do I have to pay taxes on this? Do I report it and if so, where? Also, a credit card debt was written off and I received a form for it as a discharged debt for $16,000. Do I have to pay taxes on it? Thanks for your advice.
Answer
You need to disuss this with your accountant. We do not have enough information to determine whether the debt relief related to the house was qualified or is taxable. It depends on whether it was your principal residence and the nature of the debt as a purchase money mortgage and other factors. I would expect the discharge of the credit card to be taxable, unless the insolvency exemption is applicable. Develop the facts and discuss with your accountant, of try to research the issues and exceptions on line. .
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