Reference no: EM132592915

Question 1. Valerie's home was foreclosed upon and the mortgage holder issued Form 1099-A to her, reporting the outstanding balance of the loan as $90,000, and the fair market value of the home as $99,000 on the date of foreclosure. The amount Valerie must use as the sales price to report the foreclosure of a nonrecourse loan is __________.

A. $0

B. $9,000

C. $90,000 ???

D. $99,000

Question 2. Ezra is a resident of West Virginia. He sold real estate located in Ohio to Nicole, a resident of Indiana. Nicole failed to make payments on the loan. Which state's laws determine the foreclosure process for the property?

A. Indiana.

B. No state, because the foreclosure process is controlled by federal law.

C. Ohio.

D. West Virginia.

Question 3. Which statement is NOT correct about repossession of a former principal residence?

A. If a taxpayer is eligible for the special rule, the two sale prices are combined and reduced by the face value of the original buyer's obligation, expenses of sale from both transactions, and costs of repossession.

B. To be eligible for the general rule, a taxpayer must resell the repossessed property within one year of the date of repossession.

C. A taxpayer who sold their property at a loss is not eligible for the special rule.

D. If a taxpayer uses the general rule, the gain or loss on the repossession is the FMV of the property on the date of repossession, reduced by the seller's basis in the obligation and any costs of repossession.