NEW YORK ( TheStreet) -- Short sales, increasingly the preferred route for borrowers behind on their mortgage to discharge their debt, might decline if the Mortgage Forgiveness Debt Relief Act of 2007 is allowed to expire at the end of the year.
In a short sale a borrower enters into an agreement with the bank to sell the property to a third party for an amount less than the debt owed. Banks forgive the difference between the sales proceeds and the debt owned, essentially they get shorted on the debt.
Cancelled debt is considered income and is taxable, but under the 2007 Act, debt forgiven in connection with a mortgage modification or foreclosure is exempt from tax.
The Act is scheduled to expire end of 2012. There is a
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV