I would check if you with your tax advisor. I beleive that if there is a write down that does not go through a foreclosure action, that in may be a taxable event. If there is a principle reduction in a modification that is a taxable event. But if the bank does not file the paper work it might not be taxable but the bank will have some reporting issues that they may have to discuss with the irs. Who knows what the irs will do in this enviorment?

Please review the irs publication for detailed review:
http://www.irs.gov/pub/irs-pdf/p4681.pdf


Keith Manson
First Weber Group
Certified Distressed Property Expert
Greenfield,Wisconsin

Bill,

I'm not sure it is non taxable under the Mortgage Forgiveness Debt Relief Act, but if they send you a 1099 for the amount of foregiveness you will owe taxes on it. I have talked to several lenders and others and have not found a bank yet that has sent out a 1099 for the forgiven debt. Good Luck

Jean Pritchard
Amerivest Realty of Portland
Principal Broker
503-680-4449
jeanprit@msn.com