Talking about confused and confusing, I have heard different versions of interpretation of this Act. This Relief Act as signed into law on December 20, 2007 by President Bush. The Act was passed to help out homeowners who have additional income to claim on their taxes as a result of an acquired forgiveness of debt during a home sale of a foreclosure, or a sale lower than the outstanding debt or a refinance where the new amount is less than the current amount. The President once again hopes that his act will help out the housing market, etc. etc.
I won't even try to interpret the law as I am confused myself. But what I think it means is that if you've had to refinance your home in 2007 and the new mortgage amount is less than the current amount, the difference is the income for the borrower to claim or the forgiven debt. But under this act, the forgiven debt is no longer considered to be income. Same goes for a foreclosure or a short sale. But the home should be your primary residence and there is a requirement as to how long you've own the home for. There is also a maximum limit on the debt which is $2,000,000!
If you have any questions or concerns, read this fact sheet and consult a tax advisor. And then if you have this all figured out, send me an email. Good luck if this affects you.
