I have a 9 unit Multi-Family (strictly investment) property that I purchased in 2007 for $500,000.00. Down payment of $100,000 and Financed $400,000. I invested $50,000 of my own money toward improvements in 2007. I believe I have depreciated a ballpark of around $20,000 per year for the 2007, 2008 and 2009 tax years. In the start of 2010, I executed a Deed In Leui of Foreclosure and gave the property back to the lender. My balance at the time was about $400,000.00
Do I write off a $100,000.00 loss minus the recaptured depreciation? Does the IRS allow me to include this as a sale of $400,000? Please help
1 Answer from Attorneys
Please realize my legal tax advice is based on my understanding of the facts included in your questions. Key points are:
* Since the deed in lieu of foreclosure occurred in 2010, you should receive a Form 1099 from the mortgage lender indicating an amount based on the remaining balance of the mortgage, costs of the transaction, and their assessment of its fair market value.
* The amount of the 1099, together with recaptured depreciation, any loss carry forward, and other revenue/expenses related to the property will affect your tax liability.
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