Question:
I was told that because the loan was satisfied, by the mortgage insurance holder, that it was considered a capitol gain.
I lost my butt on it, I didn't gain anything….

Answer:
Great point TaxGuru… great answer too.

I'm referring to the fact that you might have depreciated the property and refinanced the property (taking cash out) over the years. You might have only paid off your liens, but still received funds in excess of your adjusted basis.

Calculating your real estate gain takes into account a number of factors. Your original purchase price could have easily been much lower than your present liens. Although you wouldn't have had to pay gains tax when taking cash out, you would have to account at the time of sale/title transfer.

I've been working on my 1031 exchange real estate site, and should complete the site by July 4th. Many of the functions are up and running.. you can calculate your capital gain here:
http://www.1031store.com/resources/1031_…

Also, the site will have a place where you can search for professionals who will be able to help you… notably accountants(1031 exchanges are about deferring capital gains).
http://www.1031store.com/experts/1031_ex…

I hope that you do not owe anything because this sounds like a tough situation. Your foreclosure expenses probably ate up an awful lot of your potential gain. You might want to also contact a real estate attorney to make sure that you are getting a fair shake.

Hope that this helps…