Mother died in 2017 after doing a deed in lieu of foreclosure. Got 1099C to increase her taxable income. She died with no money. How do I report this?

[DianeW]

A home foreclosure is considered a sale for tax purposes because the homeowner voluntarily transfers title to the property to the lender in exchange for a release from the mortgage obligation or debt. 

The publication below will help with the calculations.  If there is debt cancellation, there will be taxable income unless you meet an insolvent or bankruptcy exception. Gain from foreclosure, if applicable, can be excluded if she lived in the home 24 months of the last five years.

• For more helpful information click here:  Home Foreclosure and Debt Cancellation

New-- just in:  The information below appears to have been extended for 2017, in the new federal budget changes approved this week.  TurboTax will have this all updated in the software so you should wait to complete your mother's return (possibly a couple of weeks). If this applies in your mother's case, you should maintain the records but there would be no taxable income.

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