Taxes and Foreclosures: Untangling the Mortgage Mess"> : "The Mortgage Forgiveness Debt Relief Act of 2007 allows taxpayers to exclude income from the discharge of debt on their principal residence. There is no dollar limit if the principal balance of the loan was less than $2 million ($1 million if married filing separately for the tax year) at the time the loan was forgiven. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for this relief.
This provision applies to debt forgiven from 2007, 2008 or 2009 (extended through 2012 by the recently passed Emergency Economic Stabilization Act of 2008). However, it is important to note that this change only applies to homes used as a principal residence. Debt forgiven on second homes, rental property or business property does not qualify for the new tax-relief provision.
Even though the forgiven debt is excluded from income, the amount of debt forgiven still must be reported (on Form 982). Clients should receive Form 1099-C Cancellation of Debt from their lender, showing the amount of debt forgiven or cancelled.
Issues and Considerations"
Of course, as with any legislation, >>>>KEEP READING FOR ISSUES
The Mortgage Forgiveness Debt Relief Act and Debt Cancellation