It’s that time of the year again. Many of us are picking up our mail and trying to get our tax documents together so we can prepare and file our 2010 returns.
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If you completed a Short Sale of a house in 2010, you will likely received an IRS Form 1099C showing the amount of debt that was cancelled in the Short Sale process. Don’t panic! The Mortgage Forgiveness Debt Relief Act applies to debt forgiven in calendar years 2007 through 2012.
According to the IRS website:
The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.
The best course of action is to contact your tax preparer or CPA, or you can download IRS Publication 4681 for guidance on the topic.
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