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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 10501
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Forgiveness of Debt: I am a mortgage broker. My client lost

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Forgiveness of Debt: I am a mortgage broker. My client lost his home in foreclosure. Property was worth $6M. He owed $5M but could not keep up the payments, and the property was still listed for sale at the time of foreclosure.
The bank valued the property at $3.5M and sent the borrower a 1099 for $1.5M in debt forgiveness.
The borrower is now retired and only receives Social Security income.
What are the rules for waiving the tax liability on debt forgiveness?
Does the borrower qualify to have the tax liability waived?

NPVAdvisor :

Hi,

NPVAdvisor :

Yes, the Mortgage Forgiveness Debt Relief Act survived the fiscal cliff when it was given a one year extension through 2013. Homeowners who sell their primary residence in a short sale or lose their home to foreclosure will not have to pay taxes on the loss up to $2 million ($1 million if married filing separately)

NPVAdvisor :

Here's the IRS guidance

NPVAdvisor :

And here's a good piece from Forbes, that talks about its being extended through 2013

NPVAdvisor :

Let me now if you have questions

NPVAdvisor :

Lane

Lane and 5 other Tax Specialists are ready to help you