Homeowners down on their luck and considering a short sale may now have to think about placing another bet.
A law exempting some from having to pay taxes on debt forgiven by the bank – the Mortgage Forgiveness Debt Relief Act and Debt Cancellation -- is set to expire at the end of this year.
Either way, homeowners contemplating short sales as a way to get out of debt may want to seek financial advice.
"There's a lot of confusion out there,'' says Alex Creel, chief lobbyist for the California Association of Realtors. "A lot of people aren't going to be tuned in to the legal technicalities. It gets really complicated.
"If you've got a lot of potential debt forgiveness in the mix and there's going to be a large tax consequence,'' he says, "you might want to see an accountant and spend some time thinking that through.''
In California, many distressed homeowners who think the act will help them avoid paying some taxes may find it doesn't, or that they don't even need it. But many will, a tax expert says.
More information at source: http://www.ocregister.com/articles/debt-373767-act-short.html