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Author: makasha Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121180  
Subject: I heard it through the grapevine... Date: 1/4/2008 4:00 PM
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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
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Author: makasha Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 97629 of 121180
Subject: Re: I heard it through the grapevine... Date: 1/4/2008 4:31 PM
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Hmmm, well it looks like I found the answer to my own question.

http://turbotax.intuit.com/tax-tools/foreclosure_turbotax/article

This 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

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Author: EarlyToRise Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 97630 of 121180
Subject: Re: I heard it through the grapevine... Date: 1/4/2008 5:01 PM
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This does not state the letter of the law

The 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=h110-3648

ETR

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Author: makasha Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 97631 of 121180
Subject: Re: I heard it through the grapevine... Date: 1/4/2008 5:34 PM
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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

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Author: ziggy29 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 97632 of 121180
Subject: Re: I heard it through the grapevine... Date: 1/4/2008 5:49 PM
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>> Tax professionals? Attorneys? JAFO? Kahuna? Phil? Peter? Ira? Donna? <<

Bueller?

#29

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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 97633 of 121180
Subject: Re: I heard it through the grapevine... Date: 1/4/2008 6:12 PM
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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

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Author: DWSZ Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 97643 of 121180
Subject: Re: I heard it through the grapevine... Date: 1/5/2008 12:24 PM
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Maybe this will help. Please note the source.

http://www.irs.gov/newsroom/article/0,,id=177049,00.html

Best regards,
Duane

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