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IRS SETS UP FORECLOSURE PAGE
September 18, 2007
There has been much talk about potential taxes for people who lose homes through foreclosure (see here, for example).
The IRS has set up a web page on the tax consequences of foreclosure.
One crucial item not mentioned on the foreclosure page: debt cancellation on foreclosure is not taxable to the extent you are insolvent - that is, to the extent your liabilities exceed the value of your assets. Debt cancellation in bankruptcy is also non-taxable.
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