What may happen after a taxpayer loses property

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Case: Review each of the following scenarios, then choose the response that correctly identifies what may happen after a taxpayer loses property to foreclosure. In each case, the fair market value of the property was less than the outstanding debt.

Julia defaulted on a nonrecourse loan on investment-use property. The lender may request a deficiency judgment after foreclosure and attempt to collect from her personal assets.

Mia defaulted on a nonrecourse mortgage secured by her principal residence. Mia may claim the deficiency as a nonbusiness bad debt.

Liam defaulted on a recourse mortgage secured by his principal residence. The lender may attempt to collect the full amount of the loan from his personal assets instead of foreclosing on the property.

Harper defaulted on a recourse mortgage secured by investment-use property. The lender may request a deficiency judgment after foreclosure and attempt to collect from her personal assets.

Reference no: EM133360088

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