Excess proceeds from sale of tax-defaulted property - how to enter?

[Johnny41]

I inherited a property in 2009 with a FMV of $5,000.  The property was foreclosed on and sold at auction in May 8, 2021.  I filed a claim to receive the excess proceeds from the auction.   The county finally approved my claim in the summer of 2023 and sent me a check for about $12,000.  How do I enter this data in turbo tax?

I went to the section for sale of second home, land, etc and started to enter in the information, but then it asked when the property was sold, so I put May 8, 2021, but it said it had to be from this tax year of 2023.  I filed a claim but it didn't get approved until 2023 and the proceeds were sent in the summer of 2023.  So I'm not sure how to enter this data?

[Mike9241]

did you report anything in 2021? general rule for foreclosure

1) if the mortgage is nonrecourse debt, meaning you are not personally liable, the property is deemed sold  (in 2021)   for the amount of the debt

2) if it is recourse debt, meaning you are personally liable, the property is deemed sold for the lesser of the debt canceled or fair market value of the property.

so if you reported nothing in 22021 you have a tax issue.

in 2023 the property was evidently sold for more than the amount to cover past due taxes, interest, other expenses and the debt.

you need a breakdown because the taxes would be a tax deduction if you itemize, so probably would be the interest.  The gross proceeds would be capital gain income in 2023

[Johnny41]

There was no mortgage on the property.  I just didn't pay the property taxes on it, so the county took possession of the property.  I didn't report any loss in 2021.

[AmyC · Accepted solution]

While the house sold in 2021, you received the money in 2023 so you will need to use the 2023 date to get through the program.