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The US government has provided some sunshine for those who have been struggling with pre foreclosure and short sale homes.  Below is actual quotation from the IRS website and link which may be very useful to you and your family.    

"The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.

This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition."

For all the information details please use this link below:
http://www.irs.gov/individuals/article/0,,id=179414,00.html  

My job is to help you with your real estate needs.  If I can be of help call me at 239-765-5478 or email jerry@765LIST.com 

Structuring the short sale as part of a 1031 tax deferred exchange may prevent unexpected tax consequences.

Claudia Kierman of ipx Investment Property Exchange Services Inc of Florida has sent us the below information.  The idea is very interesting and may well help you if you own an investment property.  It is more detailed but may work for your situation.  Please consult your CPA or Tax attorney about this information or reach Claudia Kiernan claudia.kiernan@ipx1031.com 

1031 Exchanges and Short Sales

"We are often asked whether the seller of investment property in a short sale can benefit from a 1031 exchange. The answer is yes. According to IPX 1031 Regional Manager, Jim Miller, in a short sale the lender is agreeing to release the property that is being sold from the lien of its Mortgage. Since the Mortgage Forgiveness Debt Relief Act of 2007 only applies to a principal residence, any debt forgiveness with regard to an investment property will be taxable.

For example, let's assume Ian Investor purchased 123 Main Street in 2005 for $240,000 with 100% financing. Over the past few years, the value of 123 Main Street has decreased and it is now only worth $200,000. Although Ian remains current on his loan payments he does not want to continue to own 123 Main Street because of its decreased value. Accordingly, he decides to sell 123 Main Street. His real estate agent finds a buyer and states the bank is willing to agree to accept $200,000 in a "short sale".

Although this is good news, Ian's accountant advises him that the debt forgiveness of nearly $40,000 (approximately $240,000 minus $200,000) will result in a tax liability of between eight and twelve thousand dollars. Ian does not want to pay taxes to sell a property that has already lost $40,000 in value and decides that a short sale is not a good option for him.

Ian's accountant suggests that he have his real estate agent contact his current bank to see if they are willing to exchange 123 Main Street with one of its "Bank Owned" properties. The benefit to the lender is that Ian is still solvent but "underwater" in 123 Main Street.; and by exchanging one of the properties it already owns (as a consequence of a prior foreclosure) Ian will remain financially stable and be more likely to continue paying his mortgage obligation. The benefit to Ian is that he will not be forced to recognize and pay taxes on "phantom income" and he will be able to acquire, as his replacement property, a better property which is equal in value to his original investment.

Accordingly, Ian's lender agrees to exchange 456 Park Place, worth $240,000, for 123 Main Street and transfer Ian's loan to the new property. As a result of the exchange, Ian has a better property without recognizing (paying taxes on) any gain. The lender still has one property to sell but has reduced the chance that Ian will walk away from his original $240,000 obligation.

Successfully achieving this type of transaction takes effort but it can be beneficial to investors, lenders and real estate agents. An investor could acquire the new property in an area which has stabilized and has a better chance of showing appreciation. Before selling any property in a short sale, it is very important to consult with your tax advisor. You need to receive competent advice as to what is best for your specific situation. A "do it yourself" approach may result in an unexpected tax bill which could have been reduced or avoided with proper planning."

My job is to help you with your real estate needs. Please call me at 239-765-5478 or email me at jerry@765LIST.com  anytime.

Area Homeowners who are looking at foreclosure in their future should take 2 and 1/2 minutes to view the video below to look at a real alternative to their plight.  The video explains the key new Federal Regulations for Short Sales.  Rules that could help make "short sale" an attractive alternative and save them lots of money and pain.

Buyers considering purchase of a short sale property should look at it also to see how those rules could affect them. 

I am pleased to be able to provide you the highlighted link below to click on which will open the snort video in a new window: PLEASE CLICK ON THE BELOW LINK TO VIEW.  Then call me anytime! 1-800-551-2223   

NEW RULES ON YOUR SHORT SALE PROPERTY WATCH THE NEW VIDEO THEN CALL JERRY 239-765-5478 YOUR SHORT SALE REALTOR!