Indebtedness to the seller not discharged at reacquisition , the basis of such indebtedness shall be zero!

THERE WAS NO MORTGAGE ORIGINATED AS YOU THINK/ Installment Sale. And in most every case we have seen the consumer is foreclosing on themselves. Under the operative tax payer code  If any indebtedness to the seller secured by such property is not discharged upon the reacquisition of such property, the basis of such indebtedness shall be zero.

(d) Indebtedness treated as worthless prior to reacquisition

The cause for your belief in fraud is because foreclosing attorneys rely on a computer systems to track back to a date prior to the loan origination . This is for an adjusted basis in asset .

The Y2 K Bug is so hidden and veiled, clandestine that there is NO CHANCE OF DISCOVERY

You need to have complete understanding of GAAP AND GAAS and alleged  reacquisition of real property with respect to the sale of which gain was not recognized under section 121 (relating to gain on sale of principal residence);

Then you need complete understanding of Sec 1038 [cite the mortage foreclosure and eviction is moot to the taxpayers claims in Sec 121 ]

Now read this for the bigger picture –Basis of reacquired real property.

In Sec 1038 (d) If subsection (a) applies to the reacquisition of any real property, the basis of such property upon such reacquisition shall be the adjusted basis of the indebtedness to the seller secured by such property (determined as of the date of reacquisition), increased by the sum of—
(1) the amount of the gain determined under subsection (b) resulting from such reacquisition, and
(2) the amount described in subsection (b)(2)(B).

If any indebtedness to the seller secured by such property is not discharged upon the reacquisition of such property, the basis of such indebtedness shall be zero.
(d) Indebtedness treated as worthless prior to reacquisition. If, prior to a reacquisition of real property to which subsection (a) applies, the seller has treated indebtedness secured by such property as having become worthless or partially worthless—
(1) such seller shall be considered as receiving, upon the reacquisition of such property, an amount equal to the amount of such indebtedness treated by him as having become worthless, and
(2) the adjusted basis of such indebtedness shall be increased (as of the date of reacquisition) by an amount equal to the amount so considered as received by such seller.
(e) Principal residences. If—
(1) subsection (a) applies to a reacquisition of real property with respect to the sale of which gain was not recognized under section 121 (relating to gain on sale of principal residence); and
(2) within 1 year after the date of the reacquisition of such property by the seller, such property is resold by him, then, under regulations prescribed by the Secretary,
subsections (b), (c), and (d) of this section shall not apply to the reacquisition of such property and, for purposes of applying section 121, the resale of such property shall be treated as a part of the transaction constituting the original sale of such property
(f) [Deleted]
(g) Acquisition by estate, etc., of seller. Under regulations prescribed by the Secretary, if an installment obligation is indebtedness to the seller which is described in subsection (a), and if such obligation is, in the hands of the taxpayer, an obligation with respect to which section 691(a)(4)(B) applies, then—
(1) for purposes of subsection (a), acquisition of real property by the taxpayer shall be treated as reacquisition by the seller, and
(2) the basis of the real property acquired by the taxpayer shall be increased by an amount e qual to the deduction under section 691(c) which would (but for this subsection) have been allowable to the taxpayer with respect to the gain on the exchange of the obligation for the real property.

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