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  1. #1
    Join Date
    May 2012
    Location
    Washington, D.C.
    Posts
    2

    Default Does the Mortgage Debt Relief Act of 2007 Apply to Estates

    My question involves a mortgage in the state of: Florida

    My mother's primary residence was in the state of Florida. She passed in Dec. 2007. Mortgage payments could not be supported by estate assets and the house eventually went into foreclosure. The bank did not provide file any claim against the estate during the notification period. In Sept 2010, A 1099-A (abandonement) was issued where the outstanding principal is greater than the FMV. In terms of accounting for the difference between the principal and FMV which is about $200K, does this situation apply for the mortgage debt relief act where this would be exempt from tax as ordinary income? I have differing opinions coming from two accontants whether this situation could apply for this act. Any advice or opinion would be appreciated.

  2. #2
    Join Date
    Sep 2010
    Posts
    19,901

    Default Re: Does the Mortgage Debt Relief Act of 2007 Apply to Estates

    The A in 1099-A doesn't indicate a taxable event. They still have recourse until they forgive the loan. They have 5 years to come after the estate for the deficiency. If the estate has assets, you should expect that they will.

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