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Why We Should Extend The Mortgage Forgiveness Debt Relief Act

Passed in 2007, the Mortgage Forgiveness Debt Relief Act allows the homeowners to avoid taxes on forgiven mortgage debt.  For example, if a homeowner sold their $240,000 home for $40,000 in a short sale, they’re not obligated to pay taxes on the $200,000 of forgiven mortgage debt.  However, the Mortgage Forgiveness Debt Relief Act is scheduled to expire at the end of 2012 and there is a fear that it won’t be extended.  If that happens, homeowners who are part of the mortgage settlement reached last month could find themselves facing heavy tax debt obligations.
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