If Congress doesn’t act, a law will expire at the end of the year that exempts forgiven mortgage debt as taxable income. Closing the loophole would effectively punish people whose homes sell at short sale or foreclosure. While there’s a push to have the hiatus extended, it might be hard to do in an environment where Congress is trying to raise revenue and avoid falling off the dreaded fiscal cliff. Chicago magazine Deal Estate columnist Dennis Rodkin explains what’s at stake. And, University of Chicago economist Jim Sallee parses the political rhetoric surrounding the debate over the fiscal cliff and helps us understand why Republicans want to close loopholes and Democrats favor raising taxes on the wealthy.