Foreclosures and repossessions are treated as sales. She may be able to claim the Qualified Principal Residence Indebtedness exclusion. You may look at the Insolvency Worksheet in IRS Pub 4681 if the residence exclusion does not apply to see if she qualifies for that exclusion.
You’re welcome. There is a good Insolvency Worksheet in the IRS Publication 4681. You can use it or make one of your own similar to attach to the CA returns. In the past I have prepared an Excel spreadsheet outlining all of the pertinent information including as much information is possible about the transaction.
Thank you Diane and William. I appreciate your help very much, Can I ask you another question. If she got an interest statement that was not included in her cancellation of debt I can include these amounts on a schedule A correct?