By Julia M. Wei, Esq.
Buried in the New Year’s Day bill was SEC. 202, which extended the Mortgage Debt Forgiveness Relief Act through 2013. Except, the section was cryptically called “EXTENSION OF EXCLUSION FROM GROSS INCOME OF DISCHARGE OF QUALIFIED PRINCIPAL RESIDENCE INDEBTEDNESS.” That means for homeowners who were approved for short sales or were foreclosed upon through December 31, 2013, they are still eligible for the tax relief to avoid the tax on the debt forgiveness (which is ordinarily considered income).
If you recall, the original law was passed in 2007 and intended to provide relief through the end of 2009. However, it became clear that lenders were still conducting foreclosure sales and approving short sales after 2009 and so the relief was extended by the Emergency Economic Stabilization Act of 2008 to continue through December 31, 2012.
If you’re interested in reading the bill, it’s here and Section 202 starts on Page 25.