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Financial and Business Services

Short sales need a tax break

Short sales need a tax break

Despite the recovery of the economy since 2008, there are still many homeowners who owe more than their property is worth. A bill pending in the U.S. Senate would extend the Mortgage Forgiveness Debt Relief Act through 2016, curtailing tax penalties for low- and middle-income homeowners and their creditors who wish to use short sales to cut mutual losses.

Short sales occur when lenders permit struggling borrowers to sell their homes for less than the balance of their mortgages. They are freed from holding onto a property on which they cannot make payments and which is priced too high to sell. Lenders may forgive the balance of the mortgage. Both parties avoid the harsher...