2012-12-10examiner.com

The issue triggering the increase in short sales is the Dec. 31 expiration of the Mortgage Debt Forgiveness Act of 2007, extended in 2010, unless it is extended again.

The act is important because that it allows distressed homeowners who short sale their homes from paying income taxes on the difference in the amount they sell their homes for and the amount they actually owe on the mortgage. The lender agrees to "forgive" this amount However, IRS considers it as income to the homeowner and should be taxed, even though the homeowner does not receive any money. If the act is not extended, the unpaid amount will be subject to being taxed.



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