We are foreclosing on two properties in Michigan, each with two loans (2 primaries, 2 HELOC's). One was our primary residence from 2001 to 2004 then converted to a rental and depreciated as such. THe other was our primary residence from 2004 to last year, when we started the foreclosure process on both.
Forecasting our taxes for this year, we are taking into account the depreciation recapture, but I have a few questions:
1) what is the basis (?) now for the depreciation recapture? Is it what we owed on the primary? Is it what the property went for at the Sheriff's sale?
2) If I understand form 982 right, we can exclude the debt forgiveness from our income only on the primary residence, correct? What if the rental was unoccupied?
Please let me know if you need any other info...