Since you are not married you will both file your own individual income tax returns. If you each own a 50 percent interest in the home, then you will each pick up your share of the cancelled debt, or half. However, this could change if you have different ownership positions. If this was your personal residence, then the cancelled debt income may not be taxable. There are other exceptions that also apply. Have a tax professional prepare or review your returns to make sure you report this correctly.
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If you're not married, then both of you are filing tax returns separately, and you each need to see a CPA to make sure you're reporting this correctly.
Disclaimer: Please note that this answer does not constitute legal advice, and should not be relied on, since each state has different laws, each situation is fact specific, and it is impossible to evaluate a legal problem without a comprehensive consultation and review of all the facts and documents at issue. This answer does not create an attorney-client relationship.
Generally, if you are unmarried the property if held jointly would be as tenants in common. In such case each of you would report one-half of any income that is required to be reported. Before you recognize cancellation of debt income, be aware that if you are insolvent after the discharge you have no taxable income. There is a second exclusion called qualified principal residence indebtedness (QPRI) for discharges before 1/1/13 which allows for up to a $2 million dollar exclusion. To meet the QPRI you must meet 3 parts: (1) the debt was used to acquire, construct or substantially improve a residence (2) the debt is secured by that residence and (3) the residence is used by the borrower as his or her principal place of abode fro two out of the five recent years. You should sit down with a good tax attorney or tax accountant to go over these exclusions.
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