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I bought a home in 2005 for $1,194,000 and lived there for 2 years. After renting it out from March 2008 to March 2009, I transferred the deed and mortgage to a renter in March 2009, who then defaulted on the mortgage in 2012. The bank foreclosed on the home for $587,692, and the mortgage amount due was $837,827.93. I believe I will receive a 1099-C for the difference of $250,136 along with $50,000 in penalties and interest. This looks like I'll need to pay $100,000 in federal taxes and $28,000 in California taxes on this 1099-C. Is there any way to reduce this tax burden?

September 21st, 2024

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