Owners who cashed out refinances, or had part of their mortgage debt forgiven when they sold their homes through short sales, will probably owe the irs a big paychek.
In 2007, Congress passed the Mortgage Forgiveness Debt Act,however, this law does not let everyone off the hook.
The exceptions to the rule are:
Anyone who did a cash-out refinance and spent the money on something not housing related, then got in trouble and lost their home to a foreclosure or short sale , will owe the IRS as if the money from the refinance were earned income.
The IRS will forgive tax liability only on money from home-equity loans that was spent to improve the property.
Anyone who lost a vacation home or investment property to foreclosure or short sale will owe Uncle Sam.
Multi-million dollar homes-lost or sold- are always subject to tax.
It's important to check with your Accountant to find out where you stand.
4/09/2010
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