Are there any exemptions from the capital gains taxation in a foreclosure, deed in lieu of foreclosure or short sale if the property is a principal residence?
A Yes. If the sale, whether through a foreclosure or deed in lieu or short sale, generates capital gains and if the property was the seller’s principal residence, the seller may be able to use the capital gains exclusion of $250,000 if single and $500,000 if filing a joint return. This exclusion does not apply to the ordinary income from debt relief.
