What laws are in place to protect a homeowner from having to pay taxes in a short sale?
According to the Mortgage Forgiveness Debt Relief Act of 2007, you may be provided relief from debt forgiveness taxation for certain owner occupants until December 31, 2012. Please call your attorney to determine if you are exempt from taxation. If you qualify for forgiveness of debt, your Bank should send you a Form 1099-C (cancellation of debt), and the amount of debt forgiven is shown in box 2. You must report it on your tax return on Form 982 and it must be attached to your tax return. If you have any questions, or lack experience filling out the form, please consult a certified public accountant. You can obtain form 982 and download it from www.irs.gov or call 1-800-829-3676.
