For those of you still dealing with possible forclosures or shortsales there is good news.
Congress has extended this provision one year so that it applies for tax year
2013. Unless extended again by Congress, the provision expires for debt cancelled after 2013.
As a reminder, the cancellation of debt (a foreclosure or shortsale) may result in ordinary
income, income from the sale of assets, or both. Many taxpayers are surprised to know that when they are losing there home they may have to pay tax because of it. There are a number of exceptions to this
rule, including cancellation of debt due to bankruptcy, insolvency and qualified principal residence
indebtedness. The exclusion for the cancellation of qualified principal residence indebtedness is limited
to $2 million of acquisition debt. This exclusion was scheduled to expire for tax years after 2012. So, if this is something you think you may have to do then now is the time.
Chris has been working in the industry for over a decade and has a passion for ensuring her clients have the best service in the area of taxation, accounting and bookkeeping.