Debt Forgiveness Bill Approved

Veronica Corningstone · #1 (**permalink**) 12-19-2007, 03:59 PM

The U.S. House of Representatives announced Tuesday it approved H.R. 3648, the Mortgage Forgiveness Debt Relief Act of 2007. The legislation would waive tax liability for borrowers whose mortgage balance is reduced through foreclosure or loan modification. The Senate has also approved the bill, which is now on its way to the president for his signature.

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Greg · #2 (**permalink**) 12-20-2007, 08:05 AM

Wow! You know hardly anyone knew that the IRS would come after you on this type of thing.

This is good education. If a mortgage lender sells a home for less than the balance and they write off the deficiency balance then it is something you as the homeowner would have been taxed on.

This resolves that on mortgages but did you know the same IRS rule applies for settling an account?

You pay taxes on the amount that was waived through the settlement.

But, people hardly ever claim it or put it on their return because they do not know about that law. Just watch out if you are audited!