Housing Bill Passes U.S. Senate

The U.S. Senate has passed the Housing Bill today, which the U.S. House of Representatives passed earlier this week.  The U.S. Senate passed the Housing Bill by a 72-13 vote in a rare Saturday session (today). 

President Bush to Sign

President George W. Bush has already pledged to sign the Housing Bill into law as soon as it hits his desk for signature. 

Foreclosure Assistance

The Housing Bill features a combination of income tax relief for homeowners and a $300 billion financial program to help homeowners avert foreclosures.

Fannie Mae and Freddie Mac

The Housing Bill also provides a new regulator for Fannie Mae and Freddie Mac, a dramatic U.S. Treasury Department proposal to help boost confidence in Fannie Mae and Freddie Mac by increasing their $2.25 billion credit facility with the U.S. Treasury Department, as well as allow the government to potentially buy an equity stake in Fannie Mae and Freddie Mac.

Changes to Section 121

And, as previously reported, there will be changes to Section 121 of the Internal Revenue Code.  Section 121 or the 121 exclusion allows homeowners to exclude up to $250,000 in capital gains per person on the sale of their primary residence ($500,000 for a married couple) as long as they have lived in the property as their primary residence for at least a total of 24 months out of the last 60 months. 

The changes will restrict the ability of the homeowner to exclude gain under Section 121 for periods of non-qualifying use such as converting it to rental property for a few years.  Real estate investors have been able to combine the 1031 exchange with the 121 exclusion.  This strategy may be significantly curtailed due to these changes.