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Mortgage debt forgiveness (residence question)


ILLMAS

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TP has has owned and lived in her home since 2009, in mid 2013 (6 months in 2013, 12 months in 2014, 12 months in 2015 and going on 6 months in 2016) TP has rented her home, so totaling close to 3 years.  TP wants to do a short sale, might take two to three months to complete, bank has approved the short sale, would she be out of luck and lose out on treating it as a personal residence and not qualify for the mortgage debt forgiveness: "Normally, debt forgiveness results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude up to $2 million of debt forgiven on your principal residence."?

TP is not in bankruptcy nor insolvent.

 

 

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