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Am I taxed on debt forgiven through a foreclosure or shortsale in Idaho?
Main
Foreclosures & Short Sales
Ok I know - the term "forgiven" when used in the same sentence as "foreclosure" is a bit of a joke but it is how the IRS views things.
Am I taxed on debt forgiven through a foreclosure or shortsale?
The answer is another "maybe". If the property sold through a short sale or deed transfer through foreclosure there is the possibility that you will pay tax on any debt forgiven especially if the property is NOT your principal residence.
Update Dec. 11, 2008 — The Mortgage Forgiveness 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, qualify for this relief.
This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately).
The exclusion doesn't’t 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.
Source
IRS.gov
Posted by DarrinJ at
5/20/2009 1:29:00 AM
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Home
MLS Search
Services
Seller Services
Marketing-that-works
Easy Exit Listing Agreement
Darrins Marketing
RE/MAX International
Short Sale Steps
Questions to Ask Bank
Staging Your Home to Sell
Compare Web Sites
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First Time Buyers
Trust and Estate Services
Investment Services
Relocation
Relocating out of the Boise area
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Excellent Real Estate Services Nationwide
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Articles We Read
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Boise
Eagle
Blog
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Foreclosure vs. Short Sale
Short Sale FAQ's
Recipe for Personal Success
Contact
208-287-0400