The IRS today released an advance version of Notice 2016-72 providing guidance concerning the discharge of qualified principal residence indebtedness that is initiated in 2016 but not completed before 2017.
The PATH Act (Protecting Americas from Tax Hikes Act of 2015) extended for two years—generally from January 1, 2015, through December 31, 2016—a provision that allows for the exclusion of income from the discharge of qualified principal residence indebtedness (with a modification for discharges pursuant to a binding written agreement entered into before January 1, 2017).
Notice 2016-72 [PDF 79 KB] clarifies that qualified principal residence indebtedness is discharged subject to an arrangement that is entered into and evidenced in writing before January 1, 2017, if:
Today’s guidance also applies to a TPP under the home affordable modification program (HAMP).
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