'Short sales' home sellers face huge tax bills if breaks aren't reinstated

Families would have to pay taxes on forgiven mortgage debt as if it were income

The wrangling in Congress that has prevented a package of expired tax breaks from being reinstated threatens to slap massive tax bills on thousands of Americans who have given up their homes in “short sales,” a common practice after the 2008 real estate crash in which banks allow homes to be sold at lower prices than the amounts owed on the mortgages.

Without a renewed exemption, families would have to pay taxes on the forgiven mortgage debt as if it were income, although they merely avoided foreclosure and walked away from their homes without earning anything from the sales.

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