Can the amount of COD income be affected by other liabilities relating to the property?
The existence of other liabilities, such as property taxes, can either increase or reduce the amount of your COD income. For example, there may be unpaid property taxes that are treated as imposed on you for federal tax purposes. If you have not provided funds to pay the property taxes, the taxes generally either remain as unpaid charges against the property after foreclosure or must be satisfied from the sales proceeds from the foreclosed property prior to any application of such proceeds to satisfaction of the debt. The unpaid liabilities reduce the amount of the FMV of the property that is available for satisfaction of the debt and must be taken into account in computing the amount of COD income. For example, suppose your debt prior to foreclosure was $200,000 and the FMV of the property was $170,000, but you had $10,000 of unpaid property taxes. In this situation, because the FMV of the property available to satisfy the debt would be only $160,000 ($170,000 FMV less $10,000 unpaid
