Dear Tax Talk,We are in the process of being foreclosed upon on my primary home and our one and only rental house. Our tax adviser said that we may be able to claim insolvency. Otherwise we will probably owe taxes on the rental house. Can you explain what insolvency is? Is our 401(k) balance included in our assets? Thank you.– BeverlyDear Beverly,While your creditors may not have access to your retirement accounts, the IRS does. The general rule is that if you have a debt that is forgiven, you recognize income.
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