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Attyadvisor, Attorney
Category: Real Estate Law
Satisfied Customers: 7237
Experience:  29 years of experience in General Practice, Real Estate Law and Estate Law.
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Is the "The Mortgage Forgiveness Debt Relief Act and

Customer Question

Is the "The Mortgage Forgiveness Debt Relief Act and Debt Cancellation" act still in effect for 2015? I live in Washington State. I have not paid on my home in over 3 months. My mortgage company has started the process to foreclose on me. I wanted to see
if short selling the home or potentially giving to back to the mortgage company via a "Deed in lieu of foreclosure" was an option. However, before going down this road, I am concerned about the potential deficit the IRS might tax as income if I were to do
this. I see congress had passed and extended "The Mortgage Forgiveness Debt Relief Act and Debt Cancellation" act in 2007 to address said deficits in cases like this and has extended it many times through 2014, but I cannot find anything about it covering
2015. So, if I were to short sell the home, or give it back to the bank vie a "Deed in lieu of foreclosure," am I at risk of incurring a tax hit on the deficit from my home?
Submitted: 2 years ago.
Category: Real Estate Law
Customer: replied 2 years ago.
considering you cannot write off the IRS in a bankruptcy, but you can write off a mortgage company, it seems pretty obvious it makes no sense to short sale or return a home to the bank via a "Deed in lieu of foreclosure" then? At least that is what I am facing. Guess Bankruptcy it is.
Expert:  Attyadvisor replied 2 years ago.

"This provision applies to debt forgiven in calendar years 2007 through 2014. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married 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.'

Customer: replied 2 years ago.
In my case, I am going through this now, debt has not been forgiven yet. Is the debt in question debt from when it was originated, as in when I took out the mortgage, or when the deficit is calculated as in at the close of business of a short sale or foreclosure?
Customer: replied 2 years ago.
Just need to find out if I am at risk for having to pay on the deficit, I have read the act on the IRS page, I just had not seen anything about 2015.
Expert:  Attyadvisor replied 2 years ago.

There is legislation trying to be passed to extend to 2015-16, however this would be considered taxable income.

Expert:  Attyadvisor replied 2 years ago.

Nothing yet!!

Expert:  Attyadvisor replied 2 years ago.

This is a link for the proposed extension

Expert:  Attyadvisor replied 2 years ago.

We need to keep our fingers crossed that this passes. So many people are still reeling from the impact of the these guaranteed to fail loans. As of today you are at risk of paying the deficit, unless or until the passes.

Expert:  Attyadvisor replied 2 years ago.

Do you have any additional questions for me today?