Tax Law Change To Help Homeowners In Foreclosure Sale, "Short Sale" Situations

A column in the Lawrence Journal World & News comments:

• New rules published by the Internal Revenue Service could save huge amounts of money for millions of financially troubled homeowners, especially those who sell for less than their bank is owed. [...] You must fill out IRS Form 982, “Reduction of Tax Attributes Due to Discharge of Indebtedness,” and include it as part of your upcoming return. Despite its formidable title, the form can actually be completed in just a few minutes. The document also must be accompanied by a 1099-C form, which the bank provides to verify the amount of debt that it forgave.

For more, see New IRS rules could help homeowners.

See also IRS Publication 4681: Canceled Debts, Foreclosures, Reposessions and Abandonments.

Go here for other posts on dodging the income tax on a short sale / foreclosure sale (including handy links to IRS forms and publications related to this subject). short sale income tax