As part of a last-ditch effort to avoid the fiscal cliff, Congress voted to extend the Mortgage Forgiveness Debt Relief Act for another year, until January 1, 2014. The act, originally adopted in 2007, would have expired at the end of 2012.
This provision waives forgiveness of mortgage debt on a homeowner’s personal residence from being counted as taxable income by the Internal Revenue Service. Thus, struggling homeowners who are considering short-sales or a loan modification would be able to exclude the “forgiven” debt from taxable income through the end of 2013.
For more information on short-sales, please refer to my post “Will A Short-Sale Benefit Me If I’m Filing Bankruptcy”. http://www.delawarebankruptcyhelp.com/?p=31