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I owned a home for over 5 years and lived there in 11/2003 to 10/2006 (got married and moved to our new home with spouse) and rented the home from 11/2006 to 1/2008 - then I decide to sell but did not sell due to the sour housing market so the bank foreclosed the home recently.

I am so stress right now because I do not know if I am going to get tax and how much tax percentage I am going to encounter on this home that I just recently lost.

Comments are very much appreciated... Embarassed

jameshogg · Posted: Tue Nov 18, 2008 10:13 pm Post subject:

Hi clueless!

The lender sells the property after he forecloses in order to recover the debt. If the sale price exceeds the debt he owns to you, he will return the excess amount on which you will have to pay the capital gains tax. However homeowners can also get exemption from capital gains tax on certain conditions.

However, as you have mentioned that you tried to sell the property but due to the sour market you couldn't. In that case, I don't think there will be an excess amount from the sale. There are chances of deficiency. In that case, the lender may ask you to pay the deficient amount.

Thanks

steve2 · Posted: Wed Nov 26, 2008 2:07 pm Post subject:

I agree with James. In order to pay capital gains tax, there would first have to be a gain. Chances are that if you could not sell, the value was less than the balance, so there will not be capital gains.

That said, you may have another problem with a deficiency judgment for the difference between what they sold it for at auction, and what you owed on the mortgage.

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capital gain tax question