When the homeowner has lost his house to a short sale or foreclosure, it is ridiculous to also create a phantom tax for any debt being forgiven. The borrower has already lost their home; why should the Federal Government pile on and create an additional income tax problem? Several times, the Debt Forgiveness Act has been extended under the current and previous administration. However, the provision expired on 12/31/13 and has not yet been extended into 2014.
The following IRS web site provides current and additional information on this Act, for your reference: http://www.irs.gov/Individuals/The-Mortgage-Forgiveness-Debt-Relief-Act-and-Debt-Cancellation-
Please write, call, or email your congressman and ask him or her to extend the Debt Forgiveness Act.
Contact me at 434-951-0858 or Tucker@TGBLaw.com if you have questions.
William D. Tucker, III
Tucker Griffin Barnes P.C.