THINKING ABOUT A SHORT SALE? TICK-TICK-TICK!!!!!

Everybody who has gone through a short sale, either as a seller or a buyer, knows what a nightmare the process is. Your interest in the home is not a factor in the process. It is not even a consideration.  You are basically left in the dark while the bank hyenas fight over the carcass to see who gets the biggest piece of meat. After they are through with their infighting, well then the real estate transaction takes place and people can move on with their lives. One of the problems with a short sale is that the sales price of the house does not fully pay off the mortgage. Because our wealthy and powerful friends must charge off the entire amount of the mortgage to take their critically needed tax write-offs, they issue the seller a “1099″ form when the sale is completed for the difference between the sale price and the mortgage amount. The IRS considers this difference “forgiveness of debt” and it is a taxable event for the short selling homeowner. Yes, not only do you get left with the hyena scraps, you get to pay taxes on your scraps! What a country! Well, in 2007 Congress messed up and had a constructive thought, passing the “Mortgage Forgiveness Debt Relief Act”. This law says that if you had a foreclosure or short sale, and got a 1099, you should be able, under most circumstances, to write off that debt and not have to pay taxes on it.  That was and is a good deal, and a loophole the 99% could actually use!             Problem: The loophole expires on December 31, 2012. That means in 2013, when you complete your short sale, you get to pay taxes on the forgiven debt.  If you have been thinking about short selling your submarine home, your deadline is as “clear as the sun in the summer sky” (thanks Boston! Gen-Xers – look it up in Wikipedia)             You have until December 31, 2012 to complete your short sale without tax consequences. As a lawyer I once worked with put it “govern yourselves accordingly”. But Congress will extend the deadline, you claim! Not so fast. First, this is an election year, so nobody in the Demopublican party is going to do anything to improve or decrease the re-election chances of the President Show, The do-nothing Congress, Turbo Timmy and the like, so they won’t deal with the issue until after the election, if at all. Second, the federal budget for 2012 is 1.2 TRILLION dollars, and that’s not counting the tab for the upcoming war with Iran, so Congress will need every penny they can find, so don’t count on the loophole being extended. Long story short – if you are considering a short sale, stop considering and do it.