Of most interest to real estate, the bill would extend mortgage cancellation relief for home owners or sellers who have a portion of their mortgage debt forgiven by their lender, typically in a short sale or foreclosure sale for sellers and in a modification for owners. Without the extension, any debt forgiven would be taxable, which, for underwater households, represents a financial burden. The extension is for one year and is in Sec. 202 of the bill.
But not everyone can benefit from the debt relief legislation. It covers only forgiven debt on principal residences and amounts up to $2 million, or $1 million if married but filing separately. The act also does not apply to second mortgages where the money was used for non-household expenses.
