These situations can get complicated. If you are going through bankruptcy, or if you used the house in a trade or business or as a rental property, then you might need to see a professional preparer. For a 1099-A, (Acquisition or Abandonment of Secured Property), the normal tax process is to account for the sale as a capital gain/loss using Form 9849 and Schedule D. Losses are not deductible. Gains might be taxed. If you owned the home for 2 of the last 5 years, and if you (and your spouse if joint return) lived in it for 2 years (730 days) of the last 5 years, then the capital gain can get an exclusion of $250,000 (single) or $500,000 (joint). Most people do not have to pay tax on the house because of this exclusion. While the sale does not technically have to be reported when the exclusion is sufficient to avoid tax, I am aware of IRS documents that recommend reporting on Form 9849 and Schedule D (when you get a Form 1099-A) in order to close the records for the basis. Loan types can vary with different state laws. A "recourse loan" is one that holds you personally liable. Box 5 of the 1099-A should be checked if yours was a "recourse loan." If Box 5 is checked, then the sales price should be the lesser of Box 2 (balance of principal outstanding) or Box 4 (Fair Market Value of Property) on the 1099-A. If Box 5 is NOT checked, then the sales prices is the amount in Box 2 (balance of principal outstanding) where you are not personally liable (non-recourse loan).
I have a greater concern if you also had a "Cancellation of Debt" and received a Form 1099-C. The debt, which is cancelled, can often be considered as "income". If you have a 1099-C related to the house, be sure to complete the process for discharge of qualified principal residence indebtedness that is claimed using Form 982.
