Page 44 - Other Income for Individuals

Mortgage relief upon sale or other disposition

Understanding other income is required for tax filing.

 If you’re personally liable for a mortgage (recourse
debt), and you’re relieved of the mortgage when
you dispose of the property, you may realize gain or
loss up to the fair market value of the property.

 Also, to the extent the mortgage discharge exceeds
the fair market value of the property, it’s income

from discharge of indebtedness unless it qualifies
for exclusion under Excluded debt, later.
 Report any income from discharge of indebtedness
on nonbusiness debt that doesn’t qualify for
exclusion as other income on Schedule 1 (Form
1040), line 8.
 If you aren’t personally liable for a mortgage
(nonrecourse debt), and you’re relieved of the
mortgage when you dispose of the property (such
as through foreclosure), that relief is included in the
amount you realize.

 You may have a taxable gain if the amount you
realize exceeds your adjusted basis in the property.
Report any gain on nonbusiness property as a
capital gain.
 See Pub. 4681 for more information.

42