The National Association of Realtors (NAR) applauded the U.S. House and Senate this week for passing the Mortgage Cancellation Tax Relief Act -- a piece of legislation that, if passed, will change the current tax code so distressed borrowers who have loans forgiven through a foreclosure or short sale will not be taxed on the difference.
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"If the property is sold at foreclosure or is sold for less than was borrowed, that difference is considered income and is subject to the tax," NAR said in a press release. "The Mortgage Cancellation Tax Relief Act would ensure that any debt forgiven on any mortgage debt secured by a principal residence will not be taxed. The legislation includes a provision to safeguard abuses."