Oregon house purchased for 245,500 in August 2008; FHA loan via Wells Fargo. Took $7500.00 tax credit (the one that is repaid over 15 years to the IRS).
Defaulted in April 2010. Received letter warning of foreclosure stating, "in the event of foreclosure, you would not be personally liable for any part of the debt, but you will lose your interest in and rights to the property.' A non-judicial foreclosure was completed by Well Fargo in November 2010.
Received 1099-A from bank: line 2. balance of principal 236,863. line 4. FMV listed 259,830. Item 5. 'Was borrower personally liable for repayment of the debt?. checked 'yes'.
Per IRS 4505, if 'sale' is a loss, repayment of $7500 not required. If 'sale' is gain, full repayment required.
Safe to proceed with filing sale as a loss?