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Released: March 13, 2010

Tax issues on mortgage write-downs

Source: Kenneth R. Harney, Washington Post (Free Registration)

With the Obama administration and private lenders actively considering mortgage principal-reduction programs to help financially distressed homeowners, the Internal Revenue Service has issued a new advisory to taxpayers who receive - or seek to receive - such assistance.

The IRS gets involved in mortgage principal write-downs because the federal tax code generally treats any forgiveness of debt by a creditor in excess of $600 as ordinary taxable income to the recipient.

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