Well, I have heard fourth-hand information that the President did sign into law the bill that was proposing to eliminate taxing (as income) forgiven debt on a foreclosure.I'm going to guess the IRS is not going to be broadcasting this in 72-point type on their front page. Does anyone have any links or other info about this situation? Have any of you heard anything other than fourth-hand or third-hand or second-hand?Kasha
Hmmm, well it looks like I found the answer to my own question.http://turbotax.intuit.com/tax-tools/foreclosure_turbotax/articleThis does not state the letter of the law, but it also does not mention that you have to show insolvency to take advantage of the new law. Previously, the only way to negate the income tax on forgiven debt was to show insolvency.Kasha
This does not state the letter of the lawThe bill was signed into law by Bush just before Christmas:http://www.cnn.com/2007/BUSINESS/12/20/us.mortgage.ap/Some details of the bill:http://www.govtrack.us/congress/bill.xpd?tab=summary&bill=h110-3648ETR
http://thomas.loc.gov/cgi-bin/query/D?c110:6:./temp/~c110eRylHV::I am not a lawyer, but my reading of the bill itself seems to tell me that if the house has gone down in value (below what is owed or what was paid for the home, it does not specify), or if the homeowner is insolvent, the forgiven debt is excluded from taxable income.Am I correct in my reading? Tax professionals? Attorneys? JAFO? Kahuna? Phil? Peter? Ira? Donna?<chirp chirp>:)Kasha
>> Tax professionals? Attorneys? JAFO? Kahuna? Phil? Peter? Ira? Donna? <<Bueller?#29
Well, between the article from turbotax and my reading of the bill itself, I'd say you've got it about right.A couple of things to watch: This applies only to your principal residence. So no second or vacation homes and no investment properties. And the non-taxable amount also reduces your basis in the house. So if you do some kind of debt restructuring that lets you keep the house, you may get hit with the taxable income later.My partner is at a tax update seminar today. I'll see if he brings back some additional information on this bill (and the AMT bill as well.)--Peter
Maybe this will help. Please note the source.http://www.irs.gov/newsroom/article/0,,id=177049,00.htmlBest regards,Duane
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