Short Sale/Deferral of Debt

[MargaretMort]

Someone asked my opinion, which is quite dangerous lately. She and her husband are divorcing. They just arranged a short sale on their jointly owned residence. She wanted to know if they would be able to not include the debt income, per the American Recovery and Reinvestment Act of 2009 come tax time. I have read up on the pertinent rules and I must admit I don't have an answer for her. The house would have eventually been foreclosed on because she had stopped helping pay the mortgage and he couldn't make the payments alone. In fact, they were several months behind with the mortgage payments. So far as I know, they are not insolvent. I truly don't know if the income would be excused or not.

Any help or suggestions would be very much appreciated. I haven't had to deal with this act and am not looking forward to have a client with this problem.

MargaretMort

[Karen Lee]

Form 982, Line 1e and Line 10b. See if that is what you are looking for.

[MargaretMort]

My sincere thanks to Karen Lee for the information she gave me. I printed the form and the instructions for the person asking the questions and told her there is no way I can give her any advice because I don't know the particulars. She was grateful for what I could give her.

This board is such a great help. Thanks to everyone.

Margaretmort