From IRS Tax Tips (IRS TAX TIP 2010-44), an IRS e-mail service:

Ten Facts about Mortgage Debt Forgiveness

If your mortgage debt is partly or entirely forgiven during tax years 2007 through 2012, you may be able to claim special tax relief and exclude the debt forgiven from your income. Here are 10 facts the IRS wants you to know about Mortgage Debt Forgiveness.

1. Normally, debt forgiveness results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude up to $2 million of debt forgiven on your principal residence.
2. The limit is $1 million for a married person filing a separate return.
3. You may exclude debt reduced through mortgage restructuring, as well as mortgage debt forgiven in a foreclosure.
4. To qualify, the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence.
5. Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualify for the exclusion.
6. Proceeds of refinanced debt used for other purposes – for example, to pay off credit card debt – do not qualify for the exclusion.
7. If you qualify, claim the special exclusion by filling out Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, and attach it to your federal income tax return for the tax year in which the qualified debt was forgiven.
8. Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the tax relief provision. In some cases, however, other tax relief provisions – such as insolvency – may be applicable. IRS Form 982 provides more details about these provisions.
9. If your debt is reduced or eliminated you normally will receive a year-end statement, Form 1099-C, Cancellation of Debt, from your lender. By law, this form must show the amount of debt forgiven and the fair market value of any property foreclosed.
10. Examine the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. You should pay particular attention to the amount of debt forgiven in Box 2 as well as the value listed for your home in Box 7.

For more information about the Mortgage Forgiveness Debt Relief Act of 2007, visit IRS.gov. A good resource is IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments. Taxpayers may obtain a copy of this publication and Form 982 either by downloading them from IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Links:
• Form 982
• Form 1099-C

NOTE: This Blog/Blawg, NJ Family Issues, is managed by Paul G. Kostro, Esq., an attorney/lawyer/mediator in Linden, Union County, New Jersey.

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Facts about Mortgage Debt Forgiveness originally appeared on NJ Family Issues on March 4, 2010.

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A tenancy in common is subject to partition proceedings whereas a tenancy by the entirety is not. Lawrence v. Lawrence, 79 N.J. Super. 25, 32, 190 A.2d 206 (App. Div. 1963).

A judgment of divorce from bed and board (limited divorce) is not a true divorce since it does not dissolve the bonds of matrimony but merely decrees a judicial separation. Rudin v. Rudin, 104 N.J. Eq. 524, 146 A. 351 (Ch. 1929).

A tenancy by the entirety is a creature of the common law anomalous in nature, based on the legal concept that husband and wife are one. Estates by the entirety have no moities. Each spouse holds the entirety and each receives Per tout et non per my.

Since an absolute divorce terminates the marital relationship, it converts an estate by the entirety into a tenancy in common. Sbarbaro v. Sbarbaro, 88 N.J. Eq. 101, 102 A. 256 (Ch. 1917). However, by common law mere separation of husband and wife, whether voluntary or judicial, did not affect an estate by the entirety nor change its essential characteristics. Dorf v. Tuscarora Pipe Line Co., Ltd., 48 N.J. Super. 26, 32, 136 A.2d 778 (App. Div. 1957).

N.J.S.A. 2A:34-6 was enacted to “clarify” the property rights of parties to a judgment of divorce from bed and board. The statute provides that while such a judgment remains in force all property rights of the parties shall be as though a judgment for absolute divorce had been entered.

Our Supreme Court, in Lavino v. Lavino, 23 N.J. 635, 640, 130 A.2d 369, 371 (1957), said that the statute in question does not operate ‘to dislodge any inchoate right (of dower) previously existing and so it has no ‘retroactive effect’; the right is simply prevented from arising upon property acquired after the enactment.’

The statute did not affect tenancies by the entirety created prior to the enactment of the statute [1949].

[Special thank you to R. Scott King, Esq. for bringing this case to my attention.]

NOTE: Adwokat / Prawnik Pawel Kostro mowi po polsku.

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Since an absolute divorce terminates the marital relationship, it converts an estate by the entirety into a tenancy in common originally appeared on NJ Family Issues on December 31, 1967.