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Mortgage Forgiveness Debt Relief Act
Normally, debt forgiveness results in taxable income. But under the Mortgage Forgiveness Debt Relief Act of 2007, enacted Dec. 20, taxpayers may exclude debt forgiven on their principal residence if the balance of their loan was less than $2 million. The limit is $1 million for a married person filing a separate return. Details can be found on the IRS web site:
http://www.irs.gov/individuals/article/0,,id=179414,00.html
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