It appears that the Mortgage Debt Forgiveness Act previously discussed here may be renewed after all; great news for anybody who received a principal reduction or conducted a short sale in 2015.
The original MDFA was allowed to expire on December 31, 2014, whereby any forgiveness of principal in a loan modification or short sale was taxable income to the borrower.
A new bill was introduced late Tuesday to extend the MDFA 2 more years to cover 2015 retroactively as well as 2016. The bill also states that as long as a written agreement to forgive the mortgage debt is drafted in 2016, the tax exemption will still apply, even if the actual forgiveness occurs in 2017.
More to come as this act is debated in the last few days of 2015 by Congress. It is expected to be passed and mid-week before Christmas Day.