Losing your house to foreclosure, involved in a "Short Sale?" Not only do you lose your house, your credit and have to deal with all the stress that goes with it, but any debt forgiven by the lender is considered taxable to the IRS. Seems a bit unfair to someone with a financial challenge ahead of them.

"A bill that would give homeowners facing foreclosure a tax break when lenders forgive part of their debt would make up for lost revenue by collecting more capital gains taxes on the sales of some second homes claimed as primary residences."

"HR 3648, the Mortgage Forgiveness Debt Relief Act of 2007, would eliminate a provision of the tax code that allows the IRS to tax debt that's forgiven as part of a foreclosure or loan modification as income."

"NAR said the bill would restore "fundamental fairness for homeowners in financial and economic distress" by eliminating taxes on the "phantom income" generated by foreclosures and workouts."

View the entire article HERE. (Inman News)

"To make up for the bill's $1.97 billion impact on tax revenue over the next decade, it would also tighten the rules for counting a second home, vacation or rental property as a primary residence for tax purposes. Under current law, up to $250,000 (or $500,000 if married filing jointly) of the gain on sale proceeds from the sale of a primary residence are exempt from capital gains taxes."

Labels: Bay Area Real Estate, Foreclosure, Inman News, IRS, NAR, Short Sale, Tax Relief