From the law offices of McCarthy Law PLC –
There is a mountain of misinformation out there on the expiration of the Mortgage Forgiveness Debt Relief Act and its affect on Arizona Short Sales and most of the information is pretty bad news. However, this expiration will have little impact on Arizona Short Sales or Foreclosures as long as Arizona real estate agents and homeowners get the correct information.
After years of extensions to the Mortgage Debt Forgiveness Relief Act, this act will expire at the end of this year. Thousands of Arizona underwater homeowners may feel paralyzed in their homes because they were told that they may owe a debt forgiveness tax next year if they try to sell. But here is the rub; the Mortgage Debt Forgiveness Act does not apply to ninety percent of mortgages in Arizona.
If you want to understand why this is please read this memo Expiration of MDRA is non event in AZ written to explain why the IRS does not tax the Cancellation of Debt on Non-Recourse Debt. It is up to date on current IRS tax law and current Arizona foreclosure and deficiency Law. Homeowners should understand their legal and tax obligations related to foreclosure, short sale, loan modification, deficiency and deed in lieu.