WHEW! We Can Breathe Again, Short Sale Indebtedness Forgiveness Extended.
For anyone that deals with Short Sales on a daily basis then you are aware of the ability of a seller of a primary residence to apply for a waiver of the tax indebtedness from the short sale of their home. For a short summary when a person has a short sale on their home because of a financial hardship when the sale is closed the bank has to deal with the difference between what the collected on the sale of the home and what was owed. This short fall is usually handled by issuing a 1099-C to the homeowner at the end of that year in North Carolina. For North Carolina is a Non-Deficiency state which means according to North Carolina Statute GS 45-21.38. Deficiency judgements are not allowed . So the bank issues the 1099-C basically saying that you received that deficiency as income.
BUT, one bright spot in last nights deal was they extended the exclusion from gross income of discharge of qualified principal residence indebtedness. You can see the bill at the US Congress website.
So when you complete your short sale make sure after you get that 1099-C at the end of the year you submit with your taxes IRS Form 982 : Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)
So if you need help with a short sale on your home make sure you are represented by an experienced Short Sale Specialist.