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Short Sale |
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I bought a house with friend as tenants in common 3 years ago. We both lived in the house for 1 year, then I tranferred (military) while he continued to live in the home for another year. After 1 year he stated he was filing for bankruptcy. I had him quitclaim the property to me, then tried to re-finance but was denied. My house is currently going through a short sale. Question: Do I qualify for the new Debt forgiveness act that passed? Technically, we (the owners) lived in the property for 2 years before I took him off title. He is still on the loan. |
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I'm not an accountant or a lawyer, but as far as I can see, you will qualify for that new tax treatment. In the past, homeowners who faced foreclosure or a short sale might also get a double whammy -- the IRS reasoned that "you weren't taxed when you received that mortgage money because you were going to pay it back. So if there's some that the lender never did get back, we're going to call that shortfall amount taxable income."
Under the new law, when your lender accepts the proceeds of your short sale and cancels the rest of the loan, the IRS won't tax you on the forgiven amount. This tax break applies to forgiven mortgage debt in 2007 through 2009, though some refinance debt won't qualify. |
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Edith
Originally published on January 25, 2008 |
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