My question involves a foreclosure in the State of: California
hi, i have read about the mortgage forgiveness debt relief act on the irs.gov website over and over and can't seem to find anything for my situation. i'm hoping somebody here can help.....
i bought my house back in 2005 and lived there as a primary residence through the end of 2007. in 2008, i moved out and treated it as a rental property. the renter moved out after a year in jan 2009. the house is currently on a short sale.
if the house succeeds in a short sale or gets foreclosed in the next few months, i know i will be getting a 1099-C for the canceling of debt of about $70k for primary mortgage and about $100k for the HELOC. in order to qualify for the mortgage debt relief act, and to have the cancellation of debt forgiven, i understand that it needs to be your primary residence, or prove insolvency.
the question is: does it qualify as a primary residence? the irs website does not say specifically, except that the primary residence is defined as the place you reside most of the time. (very vague). i know the irs treats capital gain exclusions for primary residences as having lived there for 2 out of the last 5 years, but can i make that argument here? now what if i say i moved back into that home after the renters moved out in jan 2009, and have been living there since, while my wife is living in our "other" home that we have been living in in 2008.....wouldn't that allow me to qualify?
thanks and any help is appreciated.

