Cancellation of Indebtedness
A lender will, on occasion, forgive some portion of a borrower's debt, which is generally treated as taxable income to the borrower. Some exceptions to this rule are available, but, until recently, when a lender forgave some portion of a mortgage debt (such as in so-called "short sales," foreclosures and "workouts"), the borrower was required to pay tax on the debt forgiven.
Extending tax relief on debt forgiveness is "a high priority," HUD Secretary Shaun Donovan said.
NAR has prepared a new guide to explain in easy-to-understand language what REALTORS® need to know about the 3.8% tax and health care reform.