Besides cancellation-of-debt relief, the Mortgage Forgiveness Debt Relief Act of 2007 has other provisions that might prove helpful to you.
More time for surviving spouses
You can exclude $250,000 worth of gains from the sale of your home. Married couples filing jointly get an even better break: They can exclude up to $500,000 of gains as long as both spouses occupied the house as a principal residence for at least two years (730 days) of the five years preceding the sale.
That sounds fine, but what if a hypothetical Beth Williams died in late 2007, and her widower Bob decides he wants to sell the big house in which they lived. Under federal law, as an unmarried surviving spouse, Bob would be able to claim the larger exclusion available to married couples only if he sold the house within the calendar year of the deceased spouse’s death. As a result, many surviving spouses had to settle for a $250,000 exclusion rather than a $500,000 exclusion. That’s not the case under the new law. Effective for sales after 2007, an unmarried surviving spouse can exclude up to $500,000 worth of gains on a home sale, providing the sale occurs within two full years of the spouse’s death.