Your Debt Could be Forgiven?

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     On December 20, 2007, the Mortgage Forgiveness Act was enacted to exclude income gain or loss from mortgage modification and/or foreclosure of one’s primary residence.

    Normally, when there is debt forgiven by the lender on one’s primary residence it is reported as taxable income even if it is a loss.   This Act excludes cancelled debt for your primary residence.  Remember, this act is for one’s primary or principal residence only.

    This Act applies to debt forgiven for the years 2007, 2008,  and 2009.

The debt is still reported, but the homeowner would use Form 982.  The homeowner will receive Form 1099-C from the lender letting the homeowner know his or her debt was forgiven by the lender.  Armed with this document and under the provisions of Form 982, the homeowner may exclude the debt all together by providing proof of insolvency.

  Please consult your tax advisor and www.IRS.gov for more information.

Originally posted 2008-12-04 07:36:58. Republished by Blog Post Promoter

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