Tuesday, October 14, 2008
Short Sale Results in Tax Liability for Sellers
The IRS properly imposed a penalty on a taxpayer for failing to include as income almost $75,000 in debt forgiveness in his 2003 tax return when he sold his property in a short sale, ruled the United States Tax Court, affirming the IRS's decision. Note: In December 2007, President Bush signed into law the "Mortgage Forgiveness Debt Relief Act of 2007." The law applies to debt forgiven in 2007, 2008, or 2009. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, may qualify for this relief, the IRS says.