What are the IRS laws on a deed that is in lieu of foreclosure?

Answer by  Rae84 (7)

Proceeds from a sale of a home in lieu of foreclosure may result in cancellation of indebtedness income. The amount that can be taxed is the sale price or the balance of the debt, whichever is greater. The lender may submit a 1099-C to the IRS for this amount.

Answer by  mammakat (11147)

You may still owe taxes on the amount of the forgiven debt- however this may be different under the Mortgage Forgiveness Debt Relief Act of 2007. Check with the IRS.

Answer by  Vladimir (459)

When the property value is less than the amount owed, and the difference is forgiven, such difference must be reported on the debtor's tax return as gift income.

Answer by  amtcura66 (1340)

The laws are something that are probably not in your favor so you might want to really read those because it is going to screw you over.