The Mortgage Forgiveness Debt Relief Act (MFDRA) allows those people who suffer through foreclosures and other hardships which result in a creditor cancelling or "writing off" a debt to avoid paying taxes on such cancelled debt.
This act expired on 12/31/13.
The IRS treats cancelled debt as income. Therefore, if my home is foreclosed and the mortgage lender writes off the balance of my mortgage of $100,000 - the IRS will tax me on the $100,000 write off as though it were money I received in my pocket.
Those going through foreclosures and these other hardships are not going to have the financial ability to pay taxes on this cancelled debt. The MFDRA needs to be extended indefinitely to protect taxpayers and Americans.