Tax Relief for Short Sales to Expire

In 2007 Congress passed legislation to assist troubled homeowners. One provision removed the requirement that the seller pay taxes on the amount of debt forgiven by the lender in a short sale. This legislation expires December 31st, 2012. Unless Congress grants an extension the seller may be obliged to pay taxes applicable to his/her tax bracket on the amount forgiven. This is a development that all of us are watching closely. Recent efforts to facilitate short sales for sellers may indicate a hopeful prognosis for an extension.

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