I lived in a house for well over 5 years. It was my only and primary residence. About 5 years ago I sold the house to a couple using a seller financed mortgage in which I was the bank. Since I qualified for the 2 of 5 rule capital gains exclusion rule, I did not have to pay capital gains on the sales proceeds, but I did have to claim the interest I received each year from the mortgage as income. This year, the people I sold the home to defaulted on the mortgage payments to me. I had to foreclose and take the house back. Now, I am wondering how this reacquiring of the home will affect my tax return for this year and what I will need to do/file once I sell it again (most likely it will be sold again using a seller financed mortgage i.e real estate contract).