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Mortgage Debt Forgiveness: The IRS lists ten important facts for homeowners whose mortgage debt is partially or entirely forgiven, including the (1) $2 million dollar limit of the exclusion ($1 million if married filing separate); (2) use of Form 982 (Reduction of Tax Attributes Due to Discharge of Indebtedness) to claim the exclusion; (3) importance of reviewing Form 1099-C (Cancellation of Debt) received from the lender, especially the amount of debt forgiven in Box 2 and the value listed for the home in Box 7; and (4) properties that do not qualify for relief such as second homes, rental property, and business property. To qualify, the debt must have been used to buy, build, or substantially improve the principal residence and be secured by the residence. IRS Tax Tip 2012-39.