Articles Comments

Debt Relief – Insolvency – Bankruptcy Information » Insolvency » Rental property lost to foreclosure – is deficiency on 1099-C eligible for insolvency exemption?

Rental property lost to foreclosure – is deficiency on 1099-C eligible for insolvency exemption?

Scenario: a piece of rental property owned by someone who reported the income/expenses on Schedule E is lost in foreclosure. The property was originally purchased at $175,000. Bank foreclosed on a loan balance of approximately $165,000. Bank bought the property at auction at $110,000, and a month later resold it at $115,000.

The foreclosing bank has not yet sent a 1099-C and I am not sure if it will. If it does, does the 1099-C get reported as income, if so what kind (Schedule E? or forgiven debt?). Is the difference between purchase price and eventual foreclosure value eligible for insolvency exemption consideration? Or, could it be considered a capital business loss since it was effectively “sold” to the bank for much less than it was originally placed in service.

Can anyone recommend a source at to research these scenarios? To further complicate things, this was originally the owner’s primary residence, but placed into service as rental property about 1 year after the purchase.

Thank you in advance for the help.


  1. Is there a law in Missouri that forces land lords to reveal if the rental property is in foreclosure? I have been reading a lot about instances where unscrupolous people who have homes going into foreclosure are renting the...

  2. FORECLOSURE ATLANTA – Top Rental Returns in the Media – WSBTV Interview Mike & Bron of TOP RENTAL RETURNS Atlanta Foreclosure Property Management Specialists assisting investors to purchase, renovate and...

  3. I live in California and have a rental property in AZ. If I short sell am I protected from tax penalties? If I short sell my house in Arizona. What are the pros and cons of the short sell. I live...

  4. I am interested in buying a foreclosure property in southern California? I want to purchase a foreclosure property in California to live in. What should I do first, how do I...

  5. 12 % on food stamps 46 out of 50 States facing insolvency billions lost in the Gulf oil spill Is the US dying? An army is said to be decimated when 10 % losses are incurred — 12 % on food stamps suggested...

Written by

Filed under: Insolvency · Tags: , , , , , , , ,

One Response to "Rental property lost to foreclosure – is deficiency on 1099-C eligible for insolvency exemption?"

  1. the tax lady says:
    If you get a 1099-C, it can go on schedule E as part of your rent receipts.

    Yes, you can try for insolvency, BUT when you remove the 1099-C from the return, it can create an NOL and the part II of the 982 will absorb the NOL.

    Your report the sale on 4797. Don’t forget you have account for depreciation. Any loss that occured in the first year is NOT deductible.

Leave a Reply

Connect with Facebook


You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Not finding what you're looking for?
Do a custom search of our entire site:

Get Adobe Flash player