Mortgage Debt Forgiveness Act - lived two out of five years?

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Latest post 01-14-2010 12:08 PM by 11laura11. 2 replies.
  • 01-14-2010 11:29 AM

    Mortgage Debt Forgiveness Act - lived two out of five years?


    I am currently going through a foreclosure on my condo.  I purchased it in May 10, 2005.  I have lived in it for 2 out of the last five years.  I also rented it for a short time period.  I don't know if my foreclosure will happen by May 10, 2010.  My question is, when does the five year period begin and end? Is if five years from the day you bought it?  Or is it the last five years?  I would think it would be the last five years, right?  I just need to know if I need to worry about this foreclosure being settled by May 10, 2010 which would be based upon the day I bought it and not the last five years? (I know this is all contingent upon Obama extending this act into 2010 as well).  Or if I only have to worry if I lived in it for two out of the "LAST" five years.  Help! Does anyone know?

  • 01-14-2010 11:54 AM In reply to

    • Drew
    • Top 10 Contributor
    • Joined on 03-30-2000
    • PA
    • Posts 49,591

    Re: Mortgage Debt Forgiveness Act - lived two out of five ye...

    I am not so sure that the 2 out of 5 rule applies to a loss situation--you/we may need more homework.

    I'm not sure sure you do not lose the ability to qualify the loss under that act if the property is not your personal residence  at time you actually sell it -you need more homework.

    I'm more familiar with 2 out of 5 rule in context of exemption of true gain on sale. ( I could be missing it in contect of gain as to forgivness of debt)

    If you miss the deadline you miss it!  And I thought  for now the act only covered 2007-09 .

    You may need to sort out if you can/need tomove back in to reestablish primay residency status.

    Rental use requires you account for depreciation issues whether you took it or not.

    If you suffer a loss on a business investment AFTER it was in business use that may be a deductible business loss

    I think you better sit down  with a tax pro to sort out what fits where and when.


  • 01-14-2010 12:08 PM In reply to

    Re: Mortgage Debt Forgiveness Act - lived two out of five ye...

    Hi Drew,

    Thanks for the response.  I found out more since my post.  You do not have to live in it for consecutive two years and it is the five year from the date of sale/discharge.  It is the mortgage debt relief forgiveness act and it has been extended through 2012.  It applies to short sales, foreclosures, deed in lieu's.  You can also have rented it out for a time period.  The only thing that matters is that you lived in it for two out of the last five years at some point or total from the date of discharge.  And if you did, it qualifies as a primary residence.  Luckily, this is the case in my circumstance. 

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