Homeowners facing foreclosure are eligible for a tax break when lenders forgive part of their debt.
Last year congress passed legislation that amended a section of the tax code that allows the IRS to tax as income any debt that's forgiven in a foreclosure sale, or when mortgage lenders agree to modify loan terms or allow short sales.
However, the change to the tax code should only be temporary, "to avoid distorting consumer and lender decisions on new mortgage loans" after mortgage markets emerge from the current "transition period."
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