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IRS.gov Website
Publication 3
taxmap/pubs/p3-005.htm#en_us_publink10001083

Foreclosures(p12)

rule
There may be tax consequences as a result of compensation payments for foreclosures.
taxmap/pubs/p3-005.htm#en_us_publink10001084

Payments made for violations of the Service Members Civil Relief Act (SCRA).(p12)

rule
All service members who received a settlement payment reported on a Form 1099 may need to report the amount on their tax return. Generally, you must include settlement payments in income. However, the tax treatment of settlement payments will depend on the facts and circumstances.
taxmap/pubs/p3-005.htm#en_us_publink10001085
Lump Sum Portion of Settlement Payment.(p12)
Generally, you must include the lump sum payment in gross income. In limited circumstances you may be able to exclude part or all of the lump sum payment from gross income. For example, you may qualify to exclude part or all of the payment from gross income if you can show that the payment was made to reimburse specific nondeductible expenses (such as living expenses) you incurred because of the SCRA violation.
taxmap/pubs/p3-005.htm#en_us_publink10001086
Interest Payment on Lump Sum Portion of Settlement Payment.(p12)
You must include any interest on the lump sum portion of your settlement payment in your income.
taxmap/pubs/p3-005.htm#en_us_publink10001087
Lost Equity Portion of Settlement Payment.(p13)
If you lost your main home in foreclosure, you should treat the lost equity payment as an additional amount you received on the foreclosure of the home. You will have a gain on the foreclosure only if the sum of the lost equity payment and the value of the main home at foreclosure is more than what you paid for the home. In many cases, this gain may be excluded from income. For more information on the rules for excluding all or part of any gain from the sale (including a foreclosure) of a main home, see Pub. 523, Selling Your Home.
taxmap/pubs/p3-005.htm#en_us_publink10001088
The rules that apply to a lost equity payment you received for the foreclosure of a property that was not your main home are different.(p13)
To find rules for reporting gain or loss on the foreclosure of property that was not your main home, see Pub. 544, Sales and Other Dispositions of Assets.
taxmap/pubs/p3-005.htm#en_us_publink10001089
Interest Payment on Lost Equity Portion of Settlement Payment.(p13)
You must include any interest on the lost equity portion of your settlement payment in your income.