MORTGAGE DEBT RELIEF ACT - SET TO EXPIRE 2013 - REALTOR CALL TO ACTION

By
Real Estate Attorney with THE ZARETSKY LAW GROUP - Board Certified Real Estate Atty and AUTOMATED LAND TITLE COMPANY
https://activerain.com/droplet/47wJ

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 

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

 RPZ99@Florida-Counsel.com

 - 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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Re-Blogged 11 times:

Re-Blogged By Re-Blogged At
  1. Bill and MaryAnn Wagner 11/30/2013 10:38 PM
  2. Rob Arnold 12/01/2013 05:23 AM
  3. Catherine Ulrey 12/01/2013 06:45 AM
  4. Dan Goodwin 12/01/2013 09:57 AM
  5. Lynn B. Friedman 12/02/2013 04:02 AM
  6. Joe Jackson 12/02/2013 04:14 AM
  7. June Piper-Brandon 12/02/2013 04:20 AM
  8. Anna Hatridge 12/02/2013 04:21 AM
  9. Dee Toohey 12/02/2013 06:09 AM
  10. The Ivanov Group 201-895-1768 12/02/2013 07:35 AM
  11. David & Lisa Webber 12/02/2013 10:37 PM
Topic:
Real Estate Industry
Location:
Florida
Groups:
Keller Williams 'Rainers
Florida Realtor® Network
Short Sale REALTORS®
PALM BEACH COUNTY SHORT SALES
Tags:
florida real estate attorney
mortgage debt relief act
palm beach real estate attorney
board certified real estate attorney palm beach

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Rainmaker
705,051
Richard Bazinet /MBA, CRS, ABR
West USA Realty - Scottsdale, AZ
Phoenix Scottsdale. Sellers, Buyers & Relocations

Thank you for the update Richard, much appreciated. My view on this is to let it expire and be done with this - I prefer to see it gone for good. It had its time and its purpose, now time to kiss it good bye. This was supposed to be temporary and it is becoming permanent with the forever extensions. All those in need with distressed properties should have taken care of it already. No excuses.

Dec 02, 2013 05:40 AM #42
Rainmaker
458,688
Dee Toohey
Innovative Realty Solutions Group - Longwood, FL
Broker, ABR, AHWD, CIPS, FMS, ePro

Thanks for the terrific summary.  I reblogged and shared with my friends and contacts. 

Dec 02, 2013 06:13 AM #43
Rainer
116,418
Ric Mills
Keller Williams Southern Az - Tucson, AZ
Integrity, Honesty, and Vast Real Estate Knowledge

You are so right.  As SS's and FC are such a large part of the market still and it would put a DOUBLE wammy on an already bad situation, we can't be silent.  Get the word out to our congress people.

Dec 02, 2013 06:24 AM #44
Rainer
482,014
Kimo Jarrett
WikiWiki Realty - Huntington Beach, CA
Pro Lifestyle Solutions

I can't imagine this law will not be extended yet with so much shadow inventory lurking in the dark, who knows what will happen, regardless of any communication to your congressmen or woman.

Dec 02, 2013 06:31 AM #45
Rainer
403,702
Dimitri Matsis-REALTOR® (818) 599-6083
Troop Real Estate Inc. Westlake Village CA - West Hills, CA

Thank you Richard for posting this along with all the links, nice work. Hopefully it will be extended.

Dec 02, 2013 06:42 AM #46
Rainer
323,508
George P. Cruz Sr.
DR Horton - Port St Lucie, FL
PSL FL CDPE, TRC, CIPS

Thanks for reminder...

 

 

 

 

 

Dec 02, 2013 06:50 AM #47
Ambassador
677,500
John DL Arendsen
CREST BACKYARD HOMES, ON THE LEVEL GENERAL & FACTORY BUILT HOME CONTRACTOR, TAG REAL ESTATE SALES & INVESTMENTS - Leucadia, CA
Crest Backyard Homes "ADU" dealer & Contractor

Great info and thanks for the heads up.

Dec 02, 2013 07:13 AM #48
Rainmaker
370,463
Travis "the SOLD man" Parker; Associate Broker
iXL Real Estate-Wiregrasss\ - Enterprise, AL
email: Travis@theSOLDman.me / cell: 334-494-7846

THANKS for the info. I'll start contacting Wednesday (at hospital tomorrow).

Dec 02, 2013 07:57 AM #49
Rainmaker
123,796
MikenMarie Edwards
The FoCoHomes Group with - Fort Collins, CO
"We Bring You Home To Colorado"

Thank you for the updated information

Dec 02, 2013 08:44 AM #50
Rainmaker
402,393
Marnie Matarese
DWELL REAL ESTATE - Sarasota, FL
Showing you the best of Sarasota!

Thank you so much for making this so simple to do.  Have written to my congressman and both senators and it took all of three minutes.  Really appreciate the update and I hope we can make a difference.

Dec 02, 2013 10:13 AM #51
Rainmaker
281,515
Richard Zaretsky
THE ZARETSKY LAW GROUP - Board Certified Real Estate Atty and AUTOMATED LAND TITLE COMPANY - West Palm Beach, FL
Florida Real Estate Attorney

NAR has chimed in on this in the recent past:

http://shar.es/Dw3Ek

 

Dec 02, 2013 03:10 PM #52
Rainmaker
274,293
Randal Jenkins
Coldwell Banker F I Gray and Sons Residential, Inc. - New Port Richey, FL

Thank you, thank you, thank you.

I was under the impression that this expired last year.

It is great to hear that this will apply to deals done this year.   The book keeper's in my CPA's office were not sure of the status and were preparing me for the worst case scenerio.

I was able to get a loan modification this year and the potential income has been a real concern.

Thanks again.
Randy

Dec 02, 2013 07:12 PM #53
Rainmaker
266,822
Dan Derito
Success! Real Estate - Brockton, MA

Thank you for the heads up Richard.  I guess that they will get around to it when they feel like it.

 

Dec 02, 2013 08:30 PM #54
Rainmaker
741,658
Ed & Tracy Oliva
West USA Realty - Arizona - Fountain Hills, AZ
The Oliva Team Arizona Agents

Good Morning and keep up the great work, I think this will help a lot of people,  good luck in 2014,  E

Dec 02, 2013 10:58 PM #55
Rainer
207,280
Stacey Johnson-Cosby
Reece & Nichols Realtors-Kansas City - Kansas City, MO
Selling Kansas City-Real Estate & City Blog

I am so glad that you posted this! Thank you for spreading the word & inspiring (encouraging) action on our part by making it easy to do what we should be doing, Richard! Our Missouri Association of REALTORS lobbyist has sent outthe Call to Action to us, which is a 2 click process. Again, thanks!

Dec 03, 2013 12:07 AM #56
Rainer
198,783
Randy Shamburger
Movement Mortgage - Greenville, SC
FHA, VA, USDA and Conventional Mortgage Expert

This is good stuff, thanks!

Dec 03, 2013 12:37 AM #57
Rainer
50,119
Nora Sims
Northern Shadows Realty, Inc. - Sedona, AZ
helping folks like you since 1978!

Are you sure congress is at wok, Richard?

Dec 03, 2013 12:06 PM #58
Rainer
295,508
Paddy Deighan JD PhD
TimeshareLawyers.pro - Vail, CO
Paddy Deighan J.D. Ph.D

It is hard to inagine that it has been a year since we had the last year end push to extend the MDFRA!!

Dec 03, 2013 05:38 PM #59
Rainer
16,109
Renee Ciufo
Big Block Realty - La Mesa, CA
San Diego County Realtor

Luckily our California Association of Realtors has just announced that even though this expires, distressed homeowners in California will not be subject to income tax associated with a short sale. Hopefully all states will follow.

A portion of an announcement email from the President of CAR dated 12/4/2013:

"We are pleased with the recent clarifications issued by the IRS and the California Franchise Tax Board, which protect distressed homeowners from debt relief income tax associated with a short sale in California.  We would like to thank Sen. Boxer and BOE member George Runner for their leadership in obtaining this guidance from the IRS and FTB.  Distressed California homeowners can now avoid foreclosure or bankruptcy and can opt for a short sale instead, without incurring federal and state tax liability, even after the Mortgage Forgiveness Debt Relief Act of 2007 expires at the end of this year."

 

Dec 04, 2013 10:32 AM #60
Rainmaker
281,515
Richard Zaretsky
THE ZARETSKY LAW GROUP - Board Certified Real Estate Atty and AUTOMATED LAND TITLE COMPANY - West Palm Beach, FL
Florida Real Estate Attorney

Renee - #60

California has statutes that make first priority purchase money mortgages non-recourse.  If a loan is non-recourse then there is no personal liability associated with it.  In the real estate collapse, California thus became a hub of "walk away from the mortgage" scenarios.  The result is that if there is no personal liability and the borrower does not retain ownership of the collateral property, there is no forgiven debt, since there is nothing to forgive relative to the borrowers indebtedness.

This is why the IRS and California came to the conclusion of no forgiven debt.  Only states with similar non-recourse language for mortgages could follow this IRS ruling.

Dec 04, 2013 12:03 PM #61
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Richard Zaretsky

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