Level 3
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Retirement tax questions

If property that is repossessed or foreclosed on secures a debt for which you are personally liable (recourse debt), you generally must report as ordinary income the amount by which the canceled debt is more than the fair market value of the property. Report the income from cancellation of a debt related to a rental activity as rental income.


https://www.irs.gov/pub/irs-pdf/p544.pdf