Las Vegas home owners of primary residences who were facing foreclosure in 2013 would have faced serious tax consequences without this extension. The original Debt Forgiveness Act of 2007 signed by President Bush allowed for owners of principle residences who either were foreclosed upon or who short sold their home to avoid significant capital gain taxes. Owners were exempted from the heavy taxes as long as their home was considered a principle residence during the preceding five years and the debt forgiven was used to purchase the home or were used as documentable improvements to the residence.
Congress has now extended the Act through 2013 which will help both types of owners, those who get foreclosed and those who want to do a short sale. Owners who know they cannot get a loan modification and are considering a short sale have a clearer path to selling their home and debt relief.