Mortgage Debt Relief Forgiveness IRS Guidance Update.

I blogged a month ago HERE about the failure of IRS to update their Question and Answer web page on mortgage debt forgiveness.

I subsequently wrote to Senator Smith to ask IRS for an explanation and appreciate his staff follow up to my inquiry. Today I received a reply from IRS providing a NEW web page HERE that explains how the IRS form 982 is to be completed. (IRS has still NOT updated the Questions and Answers page).

From the new web page, I have extracted and pasted below the relevant information on how to complete the Form 982 and how the taxpayer is notified of the amount forgiven by their lender (via form 1099-C).

"Do I have to complete the entire Form 982?
Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Adjustment), is used for other purposes in addition to reporting the exclusion of forgiveness of qualified principal residence indebtedness.

If you are using the form only to report the exclusion of forgiveness of qualified principal residence indebtedness as the result of foreclosure on your principal residence, you only need to complete lines 1e and 2.

If you kept ownership of your home and modification of the terms of your mortgage resulted in the forgiveness of qualified principal residence indebtedness, complete lines 1e, 2, and 10b. Attach the Form 982 to your tax return.

How do I know or find out how much was forgiven?
Your lender should send a Form 1099-C, Cancellation of Debt, by January 31, 2008. The amount of debt forgiven or cancelled will be shown in box 2. If this debt is all qualified principal residence indebtedness, the amount shown in box 2 will generally be the amount that you enter on lines 2 and 10b, if applicable, on Form 982."