Forgiveness of Debt

I recently recieved a 1099-C in the mail for Cancellation of Debt. I had a home that was foreclosed on in 2006 but that home was sold and I no longer own it. Why is the IRS trying to collect taxes on something I don't own?

The 1099-C you received for Cancellation of Debt is treated as income in the eyes of the IRS and should be reported as Other Income on Line 21 of your return. For example, if you owed $100,000 on the home and the foreclosure process yielded a sale price of $75,000, this amount is $25,000 short of satisfying the mortgage against the home. Since the lender is not paid the full amount that is owed they file the 1099-C treating the $25,000 shortfall as taxable income if they have been unable to collect any of the balance due. There is also a form 1099-A that is issued in the event of Abandoned Property where the owner simply vacates the property with no intention of redeeming it.