The Mortgage Debt Forgiveness Debt Relief Act was set to expire on December 31, 2012. Through eleventh hour negotiations in Congress, the Act was extended for yet another year.
Homeowners who may rid themselves of properties through short sales and foreclosures in 2013 will once again be able to benefit from this Act. The extension means that homeowners may be exempt from paying taxes on the "phantom income" they receive when a debt is discharged. Without the extension, many homeowners would be subject to enormous taxable income amounts because of big value drops in their properties.
If you are considering a short sale or a foreclosure, make sure to take to an informed advisor regarding the consequences before they occur. If you need to speak with a real estate attorney, you are welcome to contact attorney Elena Rivkin Franz at (408) 940-5360 or firstname.lastname@example.org.