Some GOOD NEWS if you have had the unfortunate situtation of having a SHORT SALE or MORTGAGE FORECLOSURE.
Although the Mortgage Forgiveness Debt Relief Act of 2007, was instituted in Dec. 2007, IT IS GOOD THRU 2012!
During our office seminar this week, we reviewed this Relief Act and thought you might be interested.
The following is taken directly from the IRS website:
Homeowners whose mortgage debt was partly or entirely forgiven during 2007 may be able to claim special tax relief ...
Normally, debt forgiveness results in taxable income. But under the Mortgage Forgiveness Debt Relief Act of 2007, taxpayers may exclude debt forgiven on their principal residence if the balance of their loan was $2 million or less. The limit is $1 million for a married person filing a separate return. Details are on Form 982 and its instructions, available now on this Web site.
“The new law contains important provisions for struggling homeowners,” said Acting IRS Commissioner Linda Stiff. “We urge people with mortgage problems to take full advantage of the valuable tax relief available.”
The law applies to debt forgiven in 2007, 2008 or 2009 (this has since been extended until 2012). Debt reduced through mortgage restructuring, as well as mortgage debt forgiven (including Short Sales) in connection with a foreclosure, may qualify for this relief.
The debt must have been used to buy, build or substantially improve the taxpayer's principal residence and must have been secured by that residence. Debt used to refinance qualifying debt is also eligible for the exclusion, but only up to the amount of the old mortgage principal, just before the refinancing.
Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the new tax-relief provision. In some cases, however, other kinds of tax relief, based on insolvency, for example, may be available. ( Call us for details)
Borrowers whose debt is reduced or eliminated may receive a year-end statement (Form 1099-C) from their lender. For debt cancelled in 2007, the lender was required to provide this form to the borrower by Jan. 31, 2008. By law, this form must show the amount of debt forgiven and the fair market value of any property given up through foreclosure.
The IRS urges borrowers to check the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. Borrowers should pay particular attention to the amount of debt forgiven (Box 2) and the value listed for their home ( Box 7).
If you or anyone you know are in a position to need this Relief Act, please call us at 800-374-7430 or email your preparer.
Debbie debbie.sherwoodquality@yahoo.com
Shawna shawna.sherwoodquality@yahoo.com
Rashelle rashelle.sherwoodquality@yahoo.com
Tracy tracy.sherwoodquality@yahoo.com
Shurell shurell.sherwoodquality@yahoo.com
Happy New Year!!! Deborah Sherwood, EA
Wednesday, January 6, 2010
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