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Hi there....another expert here. In no event would you have any tax impact. Were you in a recourse state, the Mortgage Forgiveness Debt Relief Act would be available to you because of this being your principal residence. But, in non-recourse states, you never get to the point where you need the Act because there is no debt forgiveness. When a debt is non-recourse, you never have any personal liability
for the debt. Thus, there can be no forgiveness of a debt for which you never had any personal liability. As a result, the lender should not issue a 1099-C indicating any debt forgiveness and thus there is no need to complete a Form 982 for the Act. I will tell you, however, that some lenders don't understand this and may issue the 1099-C. Should your lender do so, you can either contest the improper issuance of the 1099-C or you can file the Form 982 and utilize the Act to exclude you from any tax impact of it.
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