I couldn’t help but think of the words of my short sale mentor when I received buyer’s notification of cancellation on one of my pending short sales.
When referring to the ups and downs of short sales, he always says, “don’t take any of it personally”!!
And in this case, I’m certainly not going to take it [...]

This is a great question…and a question I was just asked by one of my Short Sale listing clients.
The answer is…it depends, but, according to this IRS web page link, http://www.irs.gov/individuals/article/0,,id=179414,00.html:
“The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principle residence. Debt reduced through [...]

Pending home sales rise 6.7 percent in April — The number of U.S. homebuyers who agreed to purchase a previously occupied home in April posted the largest monthly jump in nearly eight years, a sign that sales are finally coming to life after a long and painful slump.