Just like they did in 2014, Congress is again expected to pass a bill that extends the forgiveness of mortgage debt….
And just like last year, Congress waited until the very last minute to do so….
Now technically it’s not been approved yet….but it is expected to pass.
This is very good news for the millions of consumers who short sold or did modifications in 2015…and it’s good news for the attorneys who advised their clients to take the short sale or other deal….but did not advise them of the potential tax consequences.
The majority of the remaining 52 provisions were extended for two years, through December 31, 2016. Included among the two-year extenders are the following:
- Exclusion of COD income on principal residence: Since 2007, Section 108(a)(1)(E) has allowed a taxpayer who renegotiates the mortgage on his principal residence — or is forced to sell the home in a foreclosure or short sale that does not fully repay the lender, with the excess deficiency forgiven — to exclude up to $2 million of what would ordinarily be “cancellation of indebtedness” income under Section 61(a)(12). This deal extends the exclusion for an additional two years, at which point I would hope the real estate market would be adequately recovered so as to necessitate no further extension.