Short Sale Tax Liability Shield Extension Proposed

The law shielding homeowners from income tax liability of forgiven debt when doing a short sale expired December 31, 2013. No extensions yet, but Congressman Bill Foster of Illinois has written a bill to do just that. His proposed bill would extend the tax shield on amounts reduced by debt forgiveness from short sales up to $2 Million on primary residences from January 1, 2014 through January 1, 2016. As a way to cover the cost to the Treasury of the extension in lost tax revenue, his bill proposes the repeal of a tax break for oil and gas companies that he says is no longer necessary due to the vastly increased profits they are now receiving. This part of his bill could be an issue as the Republican-led House is anathema on any tax increases, no matter how reasonable they may appear. Knowing that, this might very well be a good time to get in touch with your Congressional representative (and your two Senators) and voice your support of the bill as written. As always, good luck.