Discussion:Foreclosure before Banckruptcy
From TaxAlmanac
Discussion Forum Index --> Tax Questions --> Foreclosure before Banckruptcy
| 3 December 2006 | |
| Hello,
I have a client who had several rental properties foreclosed, and had filed for backruptcy (ch 7). The rental properties were included in her bankruptcy filing, but she did not know at the time that these properties had actually been already foreclosed 3 weeks prior to her filing her ch 7. Does this need to be treated as a sale or is it excluded due to the bankruptcy? Thanks for any help Judy | |
| 3 December 2006 | |
| See "Holding" in Rev. Rul. 2003-80 | |
| 3 December 2006 | |
| Thank you. There is no Notice of Deficiency involved though, is this still the ruling that applies?
Should the foreclosure be treated as a sale of the properties and the client be able to deduct the loss/gain resulting from the sale? (she would show a gain on two properties becuase the canceled debt was more than the value of the property, and she would have a loss on two properties becuase the value was more than the loan that was canceled). Notice of deficiency was never issued becuase the bankruptcy was filed immediately following the actual foreclosure. Should the gain be taxed or excluded since she was insolvent? Thanks very much | |
| 3 December 2006 | |
| I know that RR indicates time periods when a NOD was issued, but in the absence of a NOD would not that imply that any net gain from the properties, would go into the bankruptcy? If not, the canceled debt would fit under the insolvency exclusion rule. | |
| 3 December 2006 | |
| Makes perfect sense, thank you. I am new to this, I appreciate your help.
J | |
| 3 December 2006 | |
| Discussion:Form 982 Discharge of Indebtedness | |
