![]() ![]() Figuring your gain or loss and income from canceled debt arising from a foreclosure or repossession is discussed later under Foreclosures and Repossessions. Whether you also recognize income from canceled debt depends in part on whether you are personally liable for the debt and in part on whether the outstanding loan balance is more than the fair market value (FMV) of the property. When your property is foreclosed upon or repossessed and sold, you are treated as having sold the property and you may recognize taxable gain. ![]() These remedies allow the lender to seize or sell the property securing the loan. ![]() But if you do exclude canceled debt from income, you may be required to reduce your “tax attributes.” These exclusions and the reduction of tax attributes associated with them are discussed later under Exclusions.įoreclosure and repossession are remedies that your lender may exercise if you fail to make payments on your loan and you have previously granted that lender a mortgage or other security interest in some of your property. Sometimes a canceled debt may be excluded from your income. These exceptions are discussed later under Exceptions. Sometimes a debt, or part of a debt, that you don't have to pay isn't considered canceled debt. This publication generally refers to debt that is canceled, forgiven, or discharged for less than the full amount of the debt as “canceled debt.” ![]()
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