Retirement tax questions

So this is a really interesting situation.  The short answer is that as long as this was a secured mortgage on your principal residence (your home where you lived most of the time) the forgiven debt is not taxable.  The easiest thing will be to report it as income in the 1099-C interview and then work through the questions to get it excluded.  If you have questions on how to do that, post back here and @JamesG1 can walk you through the specific steps.

 

The more interesting aspects of this are, 

1. the debt might not even be legal

2. the 1099-C is supposed to be issued as of the date an identifiable event occurs -- that is usually the date the bank decides the debt is uncollectible and formally writes it off in their books.  But under the regulations that existed in the 2010s, if the bank let the debt go more than 3 years without making active attempts to collect, that constituted an identifiable event that required the issuance of a 1099-C.  If the bank never tried to collect the debt, then under those rules, the identifiable event occurred in 2012 or 2013 and the current 1099-C is invalid.  And since the statute of limitations is long past for 2013 income, the 1099-C isn't taxable today or back then.

 

 

Since a foreclosure on your main home is declared non-taxable by Congress, the simplest thing is to report it and follow the steps for a foreclosure of your home to make it non-taxable.  My technical arguments don't change your tax situation, although it might be different if the debt was something taxable like a credit card or car loan.