US Federal Government Gives Tax Break to Distressed Mortgagees
In 2007 President Bush and Congress pass a bill to help distressed home mortgagees weather the real estate market storm. Normally, any debt forgiven from bank, lenders, or other financial institution, is considered as income and therefore susceptible to normal income tax. Under this temporary bill, distressed home mortgagee who have some or all their mortgage debt forgiven (short sale, foreclosure, deed in lieu of foreclosure, etc.) will NOT be taxed by the IRS. Although you must still register that forgiven debt via standard IRS form (please consult your tax adviser for detailed instructions).
Here is a link to the official IRS webpage:
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