In short, I don’t know. According to a study released by CNN.COM in early March, the number of homeowners who owe more on their mortgage(s) than their properties are worth – more commonly referred to as being “underwater” - increased by 3.7% during the last three (3) months of 2011. My contention is that this trend will continue, and the Act provides relief for, among others, homeowners who must resort to short-sales in order to get out from under this mess. Consequently, these homeowners who sell their properties for less than what they owe on their mortgage(s) are saddled with substantial tax ramifications unless they fall under one of the exemptions of the Act. Should the homeowner not qualify under the principal residence or insolvency exemptions (the two exemptions germane to the sale of real property), he or she will have to report the difference in price between the sale of the property and the amount owed as income.
Please see the following link to the IRS for more information concerning the above and let’s hope the Act is extended past 2012; not only for those who may benefit from it, but also for the benefit of the overall economy.