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Tax Tip

By
Real Estate Agent with The Real Estate Bundle, LLC

The Seattle Times posted a tax tip for home owners who lose their homes through foreclosure and have "forgiven debt" from the lender.  Normally this would be counted as regular income, but according to the Seattle times the government is waiving the tax liability on that phantom income from 2007 through 2012.  The lender will send the home owner and the IRS a copy of Form 1099-C "Cancellation of Debt".  The home owner will have to file Form 982 "Reduction of Tax Attributes Due to Discharge of Indebtedness".  Find more information and forms free on www.IRS.gov.  With so many foreclosures and short sales I thought this to be really helpful information for all real sellers who had this forgiven debt.