On December 20, 2007, H.R.3648 Mortgage Forgiveness Debt Relief Act was signed into law to relieve distressed homeowners from having to pay taxes on the amount of debt that was forgiven in a refinance or loan modification, short sale, or foreclosure.

The truth is these people do not have the money to pay the taxes anyway, which is why the Act passed with overwhelming bi- partisan support and President George W. Bush signed it into law.

If This Act is Not Extended Three Things Will Happen:

1. The US Government will NOT collect any more in income taxes because the money is simply not there. When someone in this position does not have the money to pay the taxes their accountant would write a letter to the IRS citing insolvency, proving there are no assets to pay with. In most cases the IRS would understand this and would not expect the taxpayer to pay.  We have seen many people do this after conducting a short sale on an investment property and the same would take place on primary residences.

Read more Why the 2007 Mortgage Relief Act Must Get Extended