Maybe a CPA will comment on this. I think the rules on a rental or second home changed already on that last year. I think it is 2 extra years to convert to use the exemption.

Tax issues are huge on these short sales not to mention all the other hoops you have to jump through....Sometimes I wonder if they are even worth it...

good information... I'd like to see someone get a CPA guest blogger on here to write a nice concise opinion from a pro's point of view

This post brings to mind the saying what comes around goes around. I didn't realise that people were taking advantage of the short sales for tax purposes.

Cute avatar - I like the Tshirt but where are the cats?

KC, the change to shrink that loophole so that you lived there two of the last five years was already made a year or two ago, but they are talking about shrinking it more.  The language is already in the bill as it passed the house, but I am told it is a bit nebulous and will take some interpretation.  By extending the time even more, it will generate more taxes to replace what the seller doing the short sale would have had to pay. 

Brandon, what the bill says is that the forgiven debt will no longer be treated as income, so Sellers will not have to pay taxes on money they didn't get. 

Any CPAs out there?  Of course, the bill still has to go through the Senate, and there will probably be more changes made before it becomes law. 

Dena, that cat is in the lap again, sharing with the laptop, but with the avatar it was the cat OR the computer; not both!   I don't think people have been taking advantage of anything.  This bill, if it passes, will help those who are selling short, but will have the side effect of costing some second home owners more. 

Not a big fan of txes as nothing is free. Much of tax money is wasted. The subprime mess was caused by lack of oversite in many of these transactions. Some one was not explaining the numbers to the buyers. I wonder how many people who did not have to go subprime did actually go. The Congress will likely get it wrong, let people defer the gain unitl they can pay. All who received money from the feds from Katrina are now finding that they owe taxes on the oney after they have rebuilt their homes with it. Great to know when you are finsihed and in debt that you owe more. Someone forgot to tell. I should quit rambling

Eric, the whole Katrina thing was such a mess, it doesn't surprise me that it has been messed up further.  I was in New Orleans for the NAR convention last year and was amazed by how much had not been done. 

This is vary good information.  I like ready material such as this.

I am looking at it from a little different angle Gary, because most people are focused on the tax savings on the debt forgiveness.  As we have few foreclosures but lots of second home owners, I am looking at it from their viewpoint.

Joanne, When the government gets their hand all over an issue someone is going to have to pay. We just have to see who they choose this time.

So true Mana! 

Joanne, glad to see some relief may be insight for these people and sorry to see the 2nd home and vacation home owners picking up the slack. I guess we can't have our cake and eat it, too. Although, if we could, my selection would be chocolate!

Hi Gena, I go for chocolate myself!  I must say that the majority of second home owners aren't even aware of that loophole, but there were several people who were planning with that goal in mind. 

Joanne, maybe given enough time...that too shall change once again.

One thing we can count on is change Gena!

Joanne,  The government there sounds very similar to here....squeezing every last drop out of it's citizens.

Good info for homeowners....you really stay on top of this stuff !

Jo 

But Jo, it is so they can take care of you, isn't it?   ;)

Joanne- This is great information for lots of folks. It will be interesting to see how this continues to develop with the politicians believing that buyers are ignorant and need to be taken care of and them determining to increase taxes at the same time. It seems as though when they help someone, they have to hurt someone else. It must be one of those unwritten rules.

Hi Jennifer, when they lose one source of revenue, they have to find a replacement for it.  Those with deeper pockets look like good candidates!

Jo, as someone who is also in an area that has a large number of vacation properties, I'd be very interested, as well, to get more details. 

Hi Laurie, I will be updating everyone once is becomes law.  Our little niche is one that gets surprisingly little press and sometimes you have to hunt for it!

Joanne,

I wonder what the new wording will be?  Sometimes these tax law changes have consequences that are not intended by congress.  I know AMT was never intended to hit the middle class but it is coming closer every year. 

Your guess is as good as mine Rita, but I bet it won't help second home owners!

Joanne,

Without knowing all the details, it still looks like the vacation home owners are going to lose on this one. Yet, it shouldn't have a large impact on that market segment since it doesn't appear to be a sweeping change.

Hi Esko, it will be a small number affected, but still...he with the deeper pockets is a target. 

    Thanks for the heads-up on this Joanne.  It will affect all of us and our clients in the 2nd home market.

Joan, perhaps you more than some, as I am guessing that you might have a larger share of people that would buy a home doing a 1031 with plans to retire there in a couple of years.  Of course, it doesn't affect them until they sell that home, but sooner or later you pay the piper.

Let me see if I get this right, the government makes laws to help people that have made bad decisions by punishing people that have made good decisions. It sounds like a win win for the government, they keep a lot of people off welfare and at the same time they keep the middle-class from getting further ahead. It is supposed to be for the people by the people. Who's doing the voting?

Jason, you might get a lot of people going with that comment!