MORTGAGE DEBT RELIEF ACT - SET TO EXPIRE 2013 - REALTOR CALL TO ACTION
It’s that time of year again – we need to make sure our representatives understand the importance of extending the Mortgage Debt Relief Act of 2007. This was started under President Bush because they realized that short sales were increasing and that people who were losing their homes through a short sale and not realizing any “gain” should not be punished by having to pay income taxes on the “short” or the difference between what they owe and what the home is able to be sold for. Previously this amount was treated as a gain and was taxable. This kicking the person when they are already down is really unfair and this act needs to be extended again while we continue to get through many more short sales. As values rise in most areas of the country, we won’t need this indefinitely, but we do still need it now. Please make your voice heard!
30 days to go until January 1, 2014 when forgiven debt from the disposition of a principal residence - exempted from income tax since the Mortgage Debt Relief Act of 2007 went into effect, will again become taxable. This is not the first time this law has had to be revised for an extended date, and each time it was extended the extension occurred at the last minute – or even weeks after it expired.
The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.
This provision applies to debt forgiven in calendar years 2007 through December 31, 2013. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately).
The law was explained in my prior blog articles:
MORTGAGE RELIEF ACT – ANOTHER LOOK
CONGRESS AT WORK –
There is an extension bill afoot – and it has been “in House committee” since July 23, 2013. It is a very complicated bill, and you can see it through this link:
https://www.govtrack.us/congress/bills/113/hr2788/text
Actually I’m kidding. The bill is all of one page long and consists of a thimble full of words – enough to change the expiration date from January 1, 2014 to January 1, 2016. Congress must, however, think the implications must be significant being it is sitting in committee for 5 months. Maybe they think the totality of the foreclosure / recession fallout will be over in 30 days? More likely the discussion will be thrown back and forth between the House and Senate committees to decide it if should be 2015 instead of 2016 (that is my bet!).
YOUR REALTOR CALL TO ACTION!!!
So it is time to write your Congressman/woman and your Senator to tell them about HR2788/HR2994 (House version) and Senate Bill 1187 (they have had it in committee a month longer!).
There are alternatives to not having to pay for the income generated by the forgiven debt. These are discussed in detail in my articles referred to above. But in summary they include the “insolvency test” of the taxpayer just before the debt forgiveness – this is a total asset solvency vs. total liabilities test; and the elimination of the debt being forgiven before the lender has a chance of forgiving it. This is done through bankruptcy, but timing for the bankruptcy is most important for this to work.
The name and address of your Congressman and Senator can be found at the respective hyperlink in this sentence. Write to them now to encourage them to get this bill out of committee and onto the President’s desk.
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© 2013 Richard P Zaretsky, Esq.
Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader.
Richard Zaretsky, Esq.
RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW
1615 FORUM PLACE, SUITE 3A,
WEST PALM BEACH, FLORIDA 33401,
PHONE 561 689 6660
- FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW –
We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com Website www.Florida-Counsel.com .
See our easy to find articles at TABLE OF CONTENTS - SHORT SALE AND LOAN MODIFICATION ARTICLES
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