Homeowners that experienced a foreclosure or were granted a short sale by their lender normally must pay taxes on any “forgiven debt.” This can potentially add tens of thousands of dollars in additional tax liabilities to families that are already in a huge financial bind. Congress however has created a reprieve from this rule to allow for an exemption from the “forgiven debt rule” when mortgage related losses are forgiven. Read more for the announcement as well as the brochure that you may download.

Publication 4705 is new Life Cycle series product covering the Mortgage Forgiveness Debt Relief Act of 2007. The brochure is intended to inform homeowners, whose mortgage debt was partly or entirely forgiven, about a special tax relief provision. These homeowners may be eligible to exclude the amount forgiven from their taxable income. In addition, the brochure includes some frequently asked questions.

•Since the law passed in late December 2007, the IRS has been working to get the word out about the new law that will help many taxpayers with mortgage problems. This new product was developed to provide an overview and awareness of this new provision of the tax law. Please use Publication 4705 in your outreach efforts.

An electronic copy of Publication 4705 is attached to this Product Alert for information. An initial supply of the product will be direct shipped to each Territory Office in January 2009. Additional orders can be placed through the National Distribution Center.

This publication is currently being translated into Spanish. The Spanish version, Publication 4705SP, is scheduled to be available in February 2009. More information will be provided via a Product Alert as it becomes available.

•Thanks go out to all the SPEC employees that contributed to this new product. The idea was submitted to the Education & Product Development Office by Elaine Person, Financial Institution Partnerships. The final product was reviewed and endorsed by the SPEC Outreach Product Team.

Download the Brochure: Pub 4705