The Benefits of Short Sale Homes and Tax Relief for Homeowner’s
By Sandy Flores
Special to Excelsior
The Short Sale or Short Sales are an option that allows you to avoid foreclosure if you can not hold your property or has been denied a modification. By applying for and negotiating a short sale, your lender will allow you to sell your property at current market value, even if it sells below the amount you owe on your balance. Under the terms of a short sale, your lender may forgive your mortgage debt in full under the terms described in the Law on Mortgage Debt Help 2007.
The Tax Relief in Federal Tax, known in English as “Mortgage Forgiveness Debt Relief Act of 2007, is focused on helping homeowners whose mortgage debt is partly or entirely forgiven, because of a special tax relief provision. These owners may be eligible to exclude the forgiven amount of your taxable income.
Those owners whose mortgage debt was forgiven, have the option of claiming the special tax relief by filling out Form 982, Reduction of Attributes of Tax Due to Exclusion of debt (Section 1082 Adjusted Basis), or in English “Reduction of Tax Attributes Due to Discharge of Indebtedness”, linking to your federal tax return income.
To be eligible for the Mortgage Debt and Private branding is being applied, it must be the taxpayer’s principal residence owner. A Debt used to refinance qualifying debt may also be eligible for this exclusion, but only the amount of the main mortgage refinancing earlier. Borrowers whose debt is reduced or eliminated receive from your lender a final report of the year (Form 1099-C). The lender is required to provide the borrower to January 31 this form. By law, this form must show the amount of debt forgiven and the current market value of any property surrendered through foreclosure.
It is important that borrowers carefully check the Form 1099-C. Notify the lender immediately if any information shown on this form is incorrect or misleading. Borrowers should pay particular attention to the amount of debt forgiven (Box 2) and the value listed for your home (Box 7). Borrowers who your property is foreclosed or repossessed by the lender may receive a Form 1099-A. For more information, see Publication 523 of the Internal Revenue Service (IRS).
The Relief Act Cancellation of Mortgage Debt was issued on December 20, 2007. This Act allows you to exclude certain canceled debt on your income, because normally the debt is forgiven or canceled by a lender must be included as “income” on your tax return. The Relief Act Mortgage Forgiveness Debt Cancellation of 2007, applies to debt cancellation, 2007, 2008, or 2009. However, Law Emergency Economic Stabilization of 2008 extends the deal through 2012.
Remember that there Voluntary Taxpayer Assistance
To find free tax help near you, call the Department of Revenue at 1 (800) 829-1040, or to obtain a free copy of any form or publication, you can also contact the Department of Revenue at 1 ( 800) 829-3676.
Among the Forms and Publications that can be of assistance and guidance, we can mention the following:
Form 982, Reduction of Tax Attributes Due to Debt Waiver (and Section 1082 Adjusted Basis).
Form 1099-A, Acquisition or Abandonment of Secured Property.
Form 1099-C, Cancellation of Debt.
Publication 533, Selling Your Home.
Publication 525, Taxable Income and Tax Exempt.
Publication 544, Sales and Other Disposition of Assets.
Publication 551, Basis of Assets.
Publication 908, Tax Guide to Bankruptcy.
Publication 4681, Cancelled Debt, Foreclosure, Abandoned and Repossessions.
All this information has been obtained through files, forms and publications available to taxpayers at no cost from the IRS, Department of Revenue, for reference only. If you have or need specific answers to your questions, get advice and seek the help of a CPA or Tax Professional in Tax.
As always, we recommend that you gather as much information as possible before making a final decision. Get all the necessary guidance and advice from an experienced professional to help you about all the options available, and decide which options would best suit you in particular.
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