Friday, March 18, 2011

Understanding the tax treatment of cancelled mortgage debt

I read an excellent article today on the tax treatment of cancelled mortgage debt by an excellent Real Estate writer, Kenneth R. Harney.

In a nutshell, if debt is forgiven due to a short sale, foreclosure or loan modification, the lender sends the borrower a 1099C at the end of the year. If the debt was forgiven on your principal residence and you have only used the funds to purchase, build or improve your home, it's probably not taxable income. It would be taxable if you refinanced and pulled out money to buy a Tesla. Check out IRS Form 982 and Publication 4681 for more technical details.

The link to this great article is:

Enjoy! I have a great real estate attorney and C.P.A. to refer if you need more help. Just let me know.

Judy Clarke
The Clarke Team
Bay Area Real Estate

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