Tax law treats foreclosure on your rental property as a sale of your rental property. When you sell a rental property, you have a capital gain or loss, or a Section 1231 gain or loss.
You could have a recourse or non-recourse mortgage on your rental. The differences between the recourse and non-recourse mortgages for a home are displayed and explained in exhibit 1 below.
The recourse and non-recourse results for a rental property are the same, except for these two ... Log in to view full article.