Further clarification


Posted by steele in minnesota on December 22, 2007 at 15:50:17:


In Reply to: Re: and ...
Posted by NJD on December 22, 2007 at 13:18:40:

I disgree with your thought process but perhaps not for the reason you might think. I don't think that you could show factual data that a majority of those facing foreclosures would have already qualified for the exemption any more than I could prove that a majority didn't. I think our opinions are based on our own experience and obviouly they are different.

But whether they did or didn't qualify I do believe that many thought they didn't. Or heard that this tax was out there and just assumed that it would apply to them. Either way, people had the perception that the short sale was not for them.

And perception can be as powerful as fact.

We even have seen such tax questions right here on this forum. Just in the last few days.

The following summary was just placed on one of the main real estate attorney forums. And the majority there are attorneys working with individuals, not banks or the goverment. They are seeing this as very promising.


"12-21-07

1. On December 18th, Congress approved legislation to eliminate taxes on mortgage debt. This may help struggling home owners to avoid foreclosure. The legislation, which was subsequently signed into law by President Bush on Dec. 20, provides a temporary, three-year change to the tax code to eliminate any taxes home owners might face when banks renegotiate the terms of a home loan and forgive a portion of the outstanding mortgage debt. The change in the tax law caps untaxable forgiven debt at $2 million and applies only to principal residences.

2. Existing tax rules under Section 108 of the Internal Revenue Code impel many struggling home owners to seek foreclosure over restructuring their loan with lenders because forgiven mortgage debt is taxed as ordinary income. H.R. 3648, the Mortgage Forgiveness Debt Relief Act, removes this tax burden on mortgage indebtedness, encourages market-based restructuring between lenders and home owners and discourages foreclosures.

3. The legislation also includes a provision that extends the deductibility of mortgage insurance for three more years."





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