Walking away with less

[CanonRay]

A new wave of distressed home sales is rippling, more quietly this time, through American cities and suburbs. Its unsettling effects are playing out here in Manassas, along Brewer Creek Place, a modest, horseshoe-shaped street lined with 98 brick townhouses. Several years after the U.S. foreclosure crisis erupted, the U-Hauls are back.

http://www.washingtonpost.com/wp-dyn/content/article/2010/09/25/AR2010092503767.html










Interesting that there is no mention of the tax consequences of a short sale...do these people even know about it? A friend of mine got nailed big-time on taxes after a short sale.

[shrike]

1. Amen, Canon-Ray. NEVER do you see mention of tax consequences

I told Step-son not to short sell when he was considering doing it. I.E., the tax bill. He apparently didn't believe me. But when his wife's daughter, an attorney, told him the same thing, he put the brakes on the idea.

[jtuck004]

2. Mortgage Debt Relief Act of 2007

If you are selling your primary residence as a short sale, The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt. The debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a short sale or foreclosure, qualifies for the relief granted.

The Mortgage Debt Relief Act applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion or $1 million if married but filing separately. The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition. This act was put in place for the specific purpose of helping home owners avoid the financial hardship caused by doing a short sale.

More here...

This only applies to the primary residence, purchase of the home, improvements. Second home, vacation homes, rental property - not covered.

See your tax advisor. But for many people this will alleviate the tax problem.

[fasttense]

3. Thanks jtuck. I knew our Democratic Congress had done this but wasn't sure if

it applied this year.