This past Thursday, December 20th 2007, the the president signed IRS Revision Bill HR3648 into law.

Previously, if someone sold their home "short", or negotiated a "short sale" (sold their house for less than what was owed to their lender, and the lender simply forgave the difference) the IRS considered the debt that was forgiven to be income, taxable income no less, and that homeowner who had typically just been going through hard times was slapped with a bill for the taxes owed on this "phantom income".

What this bill does is remove the taxation requirement.  The good news is it is retroactive for any homeowner who negotiated a "short sale" in 2007. That means any of the houses that sold this past year in which the seller had a "short sale" will NOT result in a 1099 requiring them to pay income taxes on the forgiven amount. 

For all you real estate professionals out there - You now have a "good news" phone call that you can make to your 2007 short-sale sellers, letting them know that they won't need to worry about an additional income tax burden. You might be able to find some new listing opportunities too, I know some sellers have been reluctant to even consider listing their homes and negotiating a short sale because of the potential tax liability under the old IRS rules.  

In addition, this bill also extends the tax deductibility of Mortgage Insurance through December 31, 2010.  More good news for homeowners who pay MI each month!

Happy Holidays!

You can also find out more information on this topic by reading these articles...

Falling Behind on Your Mortgage? 7 Solutions to Consider and Avoid Foreclosure
http://activerain.com/blogsview/246995/Falling-Behind-on-Your

Foreclosure Timeline - How long do I have?
http://activerain.com/blogsview/252371/Foreclosure-Timeline-How-long

"Subject To..." - Who has the final say in if you can buy a house?
http://activerain.com/blogsview/367605/-Subject-To-Who

For more information about myself and my real estate services, please visit www.MyNextNewHome.com. Once you're there, you can search all available properties, or request your free home consultation and market analysis.