Thanks. In that case, you have no tax liability to the IRS for the forgiveness. Normally, debt forgiveness results in taxable
income. But under the Mortgage Forgiveness Debt Relief Act of 2007, taxpayers
may exclude debt forgiven on their principal residence if the balance of their
loan was $2 million or less. The limit
is $1 million for a married person filing a separate return. Details are on
Form 982 and its instructions.
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