Yesterday, The Mortgage Foregiveness Act of 2007 was passed effectively getting rid of the question, “will I be taxed on a short sale?”
Prior to this action, the forgiven mortgage debt due to foreclosure, short sale, or deed in lieu of foreclosure was potentially taxable to the borrower. As agents we always have had to warn our clients in short sale positions about the potential of receiving a 1099 from the shorted mortgage lender, thus triggering a potential tax. In one situation I’m involved in, the potential deficiency is 1 million and the tax hit would have been devastating.
Now however, those owners in that situation, at least until 2009, are having their taxes waived, too (at least up to 35%). For those in this situation, this is really great news and likely the best holiday present they could hope for.
On their behalf, thank you congress [photopress:applause.jpg,thumb,alignright]