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P.L. 110-142, To amend the Internal Revenue Code of 1986 to exclude discharges of indebtedness on principal residences from gross income, and for other purposes
- This item is from the 110th Congress (2007-2008) and is no longer current. Comments, voting, and wiki editing have been disabled, and the cost/savings estimate has been frozen.
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Visitor Comments
Matt Napier
October 2, 2007, 10:46am (report abuse)The bill is positive, other than the "Gains on sales of principal residences" section. That section needs to be removed from the bill! That's terrible if you bought a house so a family member can move into(they may not have enough credit/can't get a loan, etc.) and you plan on moving in eventually, if you own a second home that you'll live in for at least a couple of years, or for elderly people that bought a retirement home early and plan to move into it eventually. All these owners will have to pay taxes on any gains they made when they sell, for the entire amount of time when they didn't physically live in the property! So, if they own the property for 11 years and only lived in it for the last 2 years, they'll have to pay taxes on any gains from 9 of the 11 years of ownership. Please write your Senators and Representative to tell them that you do not support section 4 "Gains on Sales of Principal Residences" of HR3648. This bill is entering the House, so take action now!
Sean Olender
October 3, 2007, 12:51pm (report abuse)This gains exclusion was wrong from its inception. Income is heavily taxed plus payroll taxes. That a homeowner can be earning capital gains ON 2 PROPERTIES SIMULTANEOUSLY 100% tax free up to $500K on each (if married) is obscene. It's up to $1 mil in gains in 4 years with ZERO state/federal tax! 100% of interest on a CD carries state and federal INCOME tax. Stock/dividend gains carry 15% tax... an INCREDIBLE misallocation of investment to RE from stupid tax benefits. 2 bed shacks selling for $700,000 in San Jose because of the tax breaks. It benefits no one except banks and RE agents.
The misplaced capital is better spent on production: factories, infrastructure. America used to make things and sell them to people. Now we trade houses and borrow HUGE money from foreigners to buy foreign products. We don't need more subsidies to mal-investment. We need to return America to producing something other than leveraged debt.
Matt Napier
October 3, 2007, 9:26pm (report abuse)RE Agents aren't particularly affected by the changes in section 4 of HR 3648 (they sell homes, and don't necessarily own or invest in them), only owners of homes in the situations I have listed in my above remarks, or investors. These tax breaks have little to do at all with the condition of real estate prices. Real estate prices were/are over-inflated in certain areas because of loose lending standards (no doc./liar loans), money being taken out of the stock market and put into real estate around 2001 and after, and supply and demand, which also includes speculators and investors.
Professor Rydstrom, Esq.
October 5, 2007, 3:12pm (report abuse)For the debate / all sides: What is our goal? Do we want to enhance economic growth and enhance homeownership at the same time, or not? The bottom line is we must make law to lessen the "extent" of the negative mortgage fallout that will enhance growth, for the benefit of OUR economy and society. Forgiveness of debt amounts should not be limited to a dollar certain, leaving the homeowner with a 'partial overload of debt they can't afford', nor should the law be blind to certain circumstances which include relief for second homes, etc. In high value areas, caps on exclusions will fall far short of supplying relief. Those taxpayers will be driven closer to insolvency, and become less effective in society.
Comprehensive Solutions to the Mortgage Meltdown: White Paper: http://www.helphomeowners.org/Helping_Homeowners_Keep_Their_Homes_FINAL1a.p... />
rrydstrom@gmail.com
Frank Remudo
October 5, 2007, 4:12pm (report abuse)Must of these 2/28 and 3/27 ARM in line to foreclosure now, have given primary occupanccy for two of the last five years to families that are excluded to pay any taxes on gains above 250K (S) or 500K (H&W). Any forgiveness of indebtness in the sale of the property is to be treated as gain in the sale of the property. Then their come our politians trying to prevent a monster that dose not exist and pop the idea to create a new bill to SHOW THAT WE ARE DOING SOMETHING when in fact there are very few foreclosees that will owe a penny to the IRS. They better keep the things running and wait to see if really so many families will be hit and then ACT.
Tom Tillman
October 7, 2007, 3:51pm (report abuse)There are tens of 1000's of foreclosures and short sales that will owe tax on these Phantom gains. This "kick 'em while they're down" law is among the most unfair and suppressive tax laws ever to be passed.
Tax on a gain you never recieved?? This is another reason the IRS should be abolished and the fairtax proposal passed. (www.fairtax.com) then, we wouldn't have to fight this and dozens of other IRS insanities.
Grant Winslow
October 26, 2007, 7:53pm (report abuse)The way that I interpret the bill, if you had moved into your rental and it was your primary residence for at least 5 years, then you will be able to deduct the full amount available; ie $250K if single, or $500K if married.
Jim V
November 12, 2007, 12:24pm (report abuse)It seems like this law is designed to do what we already have in CA. As I understand it, whether there is a gain hinges on whether or not the debt that is being forgiven is “non- recourse.” Non-recourse debt in California generally refers to debt that was used to purchase your home. Refinancing and borrowing amounts against your home that are used for other purposes could change the nature of the debt so that it becomes recourse debt. However, debt cancellation of recourse indebtedness such as money borrowed agains t your home to buy a car, will result in taxable income regardless.
hdude
November 26, 2007, 9:31pm (report abuse)Why don't they offset the tax free gain with any deductions previously taken for taxes. Seems more fair to me.
FrankO
November 29, 2007, 11:24am (report abuse)Taxes on phantom income is rediculous. I can understand if there is a distint difference in a home owner who took cash out on equity, then performed a short sale... but even so it would already be considered a recourse loan and the Lender can still go after the borrower for any/all losses. Compare that to a homeowner who is forced to either short sale and can no longer get the price they paid for or value dropped below the equity from the down payment. An additional issue at hand is, a lender gets to double dip: Lender gets to credit the losses as a loss in business AND also send a 1099 to the borrower as an expense. This is what you call unfair tax laws for business vs the individual. Either way you look at it, this needs to be passed.
Charlie
December 20, 2007, 6:08pm (report abuse)As someone facing the possibility of deed-in-lieu-of-foreclosuer right now, this would be a Godsend. To call a forgiven debt income is among the stupidest, most innae things I have ever heard in my life. It needs to be stopped, and it needs to be removed. Immediately. If people can't pay their mortgages, what makes you think they can pay a possibly tens of thousands of dollars in tax bill? Madness in its purest form.
DH
December 26, 2007, 3:45am (report abuse)HR 3648 Passed. It is now a law. 110-142.
Speaking as someone about to do a short sale...I am ECSTATIC. Speaking as an American living in the current economy it raises a question...If the delta from what I owe compared to what the house short sells for is $100,000...who is making up that difference if I no longer receive a 1099 on it? The money has to come from somewhere.
Larry
December 27, 2007, 9:24pm (report abuse)This law is rediculous! So, those who bought too much house, on too little credit, and extended themselves too far on the shortsightedness that the housing market would continue to grow now don't want a tax on the aid that someone else gives them??? If someone relieves debt against you that is the same as giving you cash. ie. taxable income. Where is the consumer responsibility? Or is that too much to ask for anymore? We are so use to thinking that everyone is a victim that we forget that they made a decision. An ill-informed decision is still your decision. Take your lumps and learn from it!!
Daniel
March 23, 2008, 7:51pm (report abuse)I just did a short sale, closed last week. I found out today that I would not have to pay tax on the 100 grand of debt that was relieved...And am very relieved. I understand where you are coming from Larry, but have you ever been in a position where you were 125k upside down on your house in the second year you owned it and on top of that, were being moved to to North Carolina enroute to a 15 month tour in Iraq? Have a heart buddy.
DENISE
April 4, 2008, 3:17am (report abuse)Can anybody tell me with the Debt Relief Act of 2007 if a person has to physically live in their home or just technically own and have it as their mailing address for two years? I am going to lose my home to foreclosure. I want to leave my home as soon as I can so the bank can do with it what they will. I just don't know when I can do that without putting myself in a worse financial situation by having to pay taxes on phantom income. My 2 years are up on April 25th.
Larry
April 19, 2008, 10:18pm (report abuse)Hey Daniel, I would be greatly relieved if I didn't have to pay taxes on the $100k too, but your situation is a little different. No, I haven't had to relocate to do a tour in Iraq or anywhere else (thank you for your service), but that doesn't mean that I don't have a heart! For every issue we can come up with at least one hardship such as yours. The problem lies in the fact that too many people are not fiscally responsible. For every one in your circumstance there are probably 20 who feel that Uncle Sam should bail them out for a bad decision so they can go and repeat it again. I will pray for your safe return from Iraq. God Bless you and your family!
Daniel S
May 9, 2008, 9:31am (report abuse)Hey Larry, in business you take risks. Some fail and you lose money. Making loans involves risk. So, who is asking for the bailout here?!
R.C.
May 16, 2008, 7:41pm (report abuse)Okay, as a consumer I took on more then I could chew I guess and Im sure I will now pay, but can someone please help by providing your education on 1.) If because I refinanced and didn't use the money towards my home, will this change the nature of my debt and will the
debt relief Act.act in my favor? or against me? "Meaning" what am I going to be responsible for if I qualify for a Short Sale?
Julie
July 3, 2008, 4:13pm (report abuse)I lost my job back in September and my unemployment has run out. I am now at a point I will not be able to make my house payment. Am I one of those people who shouldn't have bought and now wanting a "bail out", I think not. I bought my house knowing fully what was in store for me, who would've thought that the job market would be going sour as well as the real estate market. I also need to know since I refinance 2 years ago with no money out, will I be taxes on that difference when I go through the short sale?