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Occasionally, I have been asked…”If foreclosure was avoided by successfully negotiating a short sale, can the difference between the sales price received and the previous mortgage balance be treated as income for tax purposes?”

The Mortgage Debt Relief Act of 2007 specifically addresses this, and was designed to relieve most sellers of the obligation to pay income tax on the amount forgiven, particularly if the property was a primary residence.

If you, or someone you know has recently sold their home as a result of a short sale, I would encourage them to seek legal counsel or consult a tax professional to determine if the short sale in question is protected under this legislation.

Below is a link to the IRS page reflecting FAQ’s on this legislation:

IRS Q & A on the Mortgage Relief Act of 2007

For those who need a loan modification, or know someone that does, I've been reading Jack Guttentag's articles for years, and trust his information to be very useful. Be sure to click "previous column" for additional information. As the article says, there is FREE information and HELP to those that need it, and a link on how to find it. I can help with a refi, if your situation suggests that refinancing your current mortgage is a better option for you.  Call me with any questions.

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This is a decent place to look for Bank's REO websites, and their inventory.

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