The Mortgage Indebtedness Relief Act of 2007 waives the tax consequence of short sales and foreclosure. Previous to that time, owners had to consider the forgiven debt as taxable income, but this law waives that tax in many circumstances. The law expires at the end of 2012, so anyone who is considering a short sale of their home should consider doing in in 2012 while the law is in force. I have not heard of discussions to extend the law, although that could happen. It doesn’t seem to be on anyone’s front burner at this time.
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