“Do i claim this under miscellaneous income and do i need a 1099 form ton do so.I have not recieved one as of yet?”----> A foreclosure ends with a trustee's sale, where the highest bidder receives the property. The disbursement of funds from the sale pays off the mortgage. If any monies remain after paying the mortgage, then a mortgage foreclosure surplus exists. Finally, you who lost your property in a trustee's sale receive whatever money remains, I guess in this case $4,000. Assume the bank is owed $150K and the home sells for $200K. The county clerk ends up with the funds because the trustee can't keep the excess proceeds.The county is supposed to give the funds to the original owner after any other debts attached to the property are satisfied.In reality the owner doesn't even know the money is there.So, No, you can’t deduct the surplus( LTCG)of $4,700 on Sch A of 1040 as a misc. itemized deduction; you never paid any tax on the money,$4,700.$4,700 is not taxable income.