Are we seeing the last of short sales?

[Ryan Moses]

One of the incentives of a short sale was that you got a tax break based on an act passed by Congress in 2007.

Short sales are classified as debt forgiveness, therefore in a normal situation homeowners would have to pay taxes on the money they received from one (in fact, the IRS is supposed to count the amount of debt your lender forgives as "income"). Under the Bush tax cuts, though, short sales were given an exemption.

Now that those Bush-era tax cuts expire at the end of the year are we likely to see a decline in short sales?

[Wayne Brooks]

First, my guess is they get extended. Second, if you have basically negative net worth outside of the short sale transaction, you're still exempt under IRS insolvency rules (form 982).