Legal Question in Tax Law in California

Last year I lost an investment real estate property. It is a bare lot.

The Bank (US bank) forclosed and sent me a 1099-A for the full amount of the remaining balance.

Does it means I have to pay taxes on that money? And if I do, does, it means they gifted me that amount of money. What Happen when the sell that property? I pay taxes on an asset or money equivalent, on an asset I did received?

Can you explain?

Thank you.


Asked on 5/21/11, 4:31 pm

2 Answers from Attorneys
Michael Stone Law Offices of Michael B. Stone Toll Free 1-855-USE-MIKE

Unfortunately, you borrowed X dollars and you never had to pay it back, so it's taxable income. If this was your residence being foreclosed you might be able to take advantage of a federal law forgiving you from taxes on this amount. But an "investment" property such as raw land might not qualify. See a tax advisor.

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Answered on 5/21/11, 5:13 pm
Donald Field Donald L. Field, Jr., Attorney at Law

The calculation of the tax effects of the foreclosure is complex and depends upon the fair market value of the property foreclosed. See: http://www.irs.gov/pub/irs-pdf/p4681.pdf or consult a CPA or tax attorney.

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Answered on 5/22/11, 8:46 am


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