I am doing my 83 year old mother in laws taxes. She recently had a home foreclosed on her in Wilmington, NC. there was excess funds of $116k which we are now using to take care of her since she is in assisted living. she received a 1099-misc from the county for the excess funds causing her to have a tax debt of $26k for the federal and $6k for state. I know that you can have a tax exemption on selling a house up to $250k but this was not a tradidtional sale and the way that the monies were reported are not the same. is there anything we can do to lower the tax bill. i know we can do a payment plan and if we have to we will. but i am also wondering that is we do have this huge bill can she apply for forgiveness. i used to work in the field and know all about it so i do not need help preparing forms and all. the money is in my husbands seperate account that is used specifically for her needs and living costs at the facility.
