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H.R. 1876, The Mortgage Cancellation Relief Act of 2007 (68 comments ↓)
- This item has been mooted by the passage of another bill on the same subject or by other events. Check 'Related Bills' below to see if other bills on this subject have been passed into law. Mooted: 12/20/2007.
H.R. 1876 would amend the Internal Revenue Code of 1986 to exclude from gross income of individual taxpayers discharges of indebtedness attributable to certain forgiven residential mortgage obligations.
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Visitor Comments
Cindy Klinger
We totally lost a second home in a landslide. This legislation should include all property connected to a natural disaster.
Kathy B
Make all applicable discharges made in the 2007 tax year eligible for this relief, not just those made after the date of enactment of this Act.
luhrs54@aol.com
Has the bill been passed "HR1826"
Teluride
According to the article above, it was only referred to committee so far.
Nancy
I agree with Kathy B to make all discharges for the 2007 year as the rate of foreclosures has skyrocketed!
Marti Scott
It's amazing the IRS will not allow loss on personal residence to be deducted (i.e. any downpayment/equity loss) that a home owner loses, but MUST pay tax on phantom income of mortgage debt relief.UNBELIEVABLE!
Di
I am in the process of a quick sale..looks like the amount of the debt to forgiven will be 90,000..i am hoping that if this bill passes, any debt occured in 2007 will be include. It is very unfair to have to pay taxes on money never seen.
Steve
By passing the "Fair Tax" legislation, this whole problem would be eliminated for everyone because there would no longer be tax on income of any type, "phantom" or otherwise. Let's all join in the grass roots support. www.fairtax.org
Ray
Real estate has fallen so drastically in Arizona that my loss from foreclosure or short sale will be between $250-$300k. I can't even imagine paying taxes on that phatom income! I pray that this bill is passed and will be retro-active.
Darrell
I just finished selling my house thru a short sale and was $190,000 short. I am praying I will not have to pay taxes on this phantom income that I never saw and don't have the money to pay. Lets get this bill passed and make it retro active for anything that closed in 2007.
Jackie A.
I think this bill will help a lot of people. This tax break will give people a chance to recover their financial stability. It would not be fair for people to paid taxes on money they never received.
D.G.
As a realtor, i think this would be very helpful, especially for my clients that all of them are going to foreclosure. it's money never seen, and why pay taxes for a house debt when a poor homeowner is losing his house. and sometimes doesn't even have a place to live, plus getting back on track from payments towards a house at the time of price bubbled, is hard. hope this bill makes it through.
J.R.F.
Is there any way to expedite the process for consideration of this bill?
G.S.
I fear that some will treat this as an avenue to avoid foreclosure and thus Financial Institutions will lobby against opening the flood gates for short sales. Let's hope something doesn't hold up this bill! I will likely be short selling for about 70k if I can't sell my house.
Marc H.
I am in the same boat with a short sale at 90-100K in the hole. I dread the destruction on what';s left of my credit when I can't pay the taxes on that amount. I have high hopes for the bill but as always am preparing mentally for the worst.
G. R.
Let's rally for this bill - get all of your friends to write their local congressman
RG
You loan me $300,000 to buy a $320,000 house. The market crashes and it drops in value to $225,000. I decide to give you, my lender, the house back, and now you sale it and loose $75,000. I get off scott free. Will you give me another loan to buy another house? While I do understand getting taxed on phanton income is not really fair, we must do this in a way that Lenders can survive. Because of the over valuing markets, 120 lenders have gone out of business in the last 9 months because they are getting these houses back and taking the loses. Be careful for what you wish for, it may come true!
VB
Talk to a tax advisor. Even today, I think if you are "insolvent" under the tax code, you don't have to pay income. Also you may have a loss not a gain on sale. Take the time to check it out.
BP
Anyone know if this bill being proposed would include a debt settlement with a credit card company's (same type of 1099c)?
scared in AZ
Due to many bad luck and unforseen situations I will be doing short sale at at about $300K. Before short sale, I had 813 FICO. I am not a dead beat, I have a great job and have always paid every bill but being taxed on $300K will take years to recover.
How do we show our support for the passing of this bill. We need to band together on this and show how much we need it.
Arthur Mason
What has to be done to get this bill moving? It is sorely needed!
PacMan
I was lucky. Only a $40k write-off. Never missed a payment. We certainly need to get this thing moving now!
RG - "Getting these houses back" is foreclosure. This is not foreclosure. It is a mutual risk mitigation agreement between the borrower and lender to forestall a foreclosure. Someone actually buys the house at current fair market value and another loan is usually created.
goofycart
I am currently going through a short sale on a house we bought 2 years ago. If this bill does not pass it will be a SHAME, how fair will it be to me when my house sells for $100,000.00 less than what I owe. It truly doesn't make sence to force us to pay taxes on that amount. Think about it, do you really think we have the $$ for the taxes, wouldn't we prefer to keep our home and our good credit instead?? We NEED to PUSH this BILL.....
GoofyCart
I agree with almost all of you I am in the same situation. I am currently going through a Short Sale on a house I bought 2 years ago. Unlike RG, I am thinking logicly. If I had the money to pay the taxes on the income I did not make wouldn't I still have my HOUSE? I agree that it may not be the Mortgage Companies fault if the market crashes but as a consumer it is not mine either. I think creating guidelines to the bill would be a good idea. This is no different than someone filling Bankruptsy over and over again REGULATIONS is key in creating this bill to save BILLIONS of dollars.
PacMan
Any word at all on this other than it is sitting in some committee? It's September already and I feel the clock ticking. I've written to whoever I could but still, would be nice to know something more. Anyone?
PacMan
How does this bill relate to the "The Mortgage Cancellation Relief Act of 2007 (S. 1394). They seem to be the same thing. Is one Bill further along than the other? Perhaps we should determine which of these is most likely to pass the soonest and expend our energies there?
David Oconnell
Listen to Steve... www.Fairtax.org
Lucrecia
What is the status of this Bill? Is seems as if the morgage situation is only getting worse, so why is it taking so long to make this happen?? Same with the immigration situation. Big issues and it takes forever to resolve them. Thanks
Pat
What has happened to responsible buying....When ads ran "morgage your way to wealth"....It is sad, however why should we bail out foreclosed home owners any more than we should pay farmers not to grow wheat and then buy glutin from China...Go Figure. It is time for people to take responsibility for their actions. Help those whose homes are destroyed by acts of nature, not those who have lost homes due to living outside their means.
Clinton
Respond to Pat. Ok this is not bail out for home owner.
If a farmers loose everything then will they get tax on thing that they don't earn? I guest not.
We the home owner who loose everything on the house. Have bad credit and now have to pay tax on what we don't earn.
It just add insult injury. Some one at the edge let push them some more so they can fall of the cliff.
Respond to PAT
Has the idea ever ran your head that maybe some people were sold a house falsifying information simply to make commission on a house we could never afford. We were informed that we would be able to afford the payments. However, we are only 23 with ruined credit and all becasue we trusted our real estate agent. Now, tell me do you still think it is fair that we have to pay taxes?? All we wanted was a home to call our own and now we are loosing everything we have. So dont sit there and say we are being "bailed out". Of course you say that now, but I wonder if the story would be the same if you were in my shoes. THINK!!
Ben
What is the difference between short sale and foreclosure? How do you choose one over the other? Which one has tax implications?
Amber
My family is in the process of a short sale right now. Our loss will be over 100K. We also have great credit and are very responsible citizens. We really need this bill to pass. I will do whatever it takes to get the word out because I know that if more people in our situations knew about this bill we could make it happen.
Pacman
To Ben. A shortsale is when you NEED to sell your home in a hardship situation (which you have to prove to the satisfaction of the bank BTW) but can field and offer less than what you owe on your home (i.e. you are upside down). To AVOID foreclosure the banks are willing to forgive part of the loan to complete the sale. They do not want the expense of foreclosure and have found they SAVE money on the deal. They have also been making interest all along. You walk away with nothing, no savings. Nothing. The bank does not take ownership of the home and there is no bankruptcy. Remember this was a hardship that brought this about. Now after doing the right thing and going through a very painful loss the IRS comes to you next year with a huge tax bill for money you never had.
Jim
Why should the rest of the taxpayers pay for your gamble. There is no phantom income, you got the money from the bank and used it to buy a house. You guessed wrong. You think the Govt should reimburse my bets in the stock market too??
MH
Must be nice, Jim.
Response to Jim
Is there a tax increase in this thing I don't know about? This isn't sticking it the tapayers. The government is simply taking less of our money. By doing so we keep many people solvent who otherwise would go under. These people will ultimately pay more in taxes due to greater earnings potential. They stay in the game. I don't think there is any cost to the taxpayer. The point about hardship is an important one. People enter into short sales because they are forced to.
Rita
I lost my house in foreclosure in June - lost my job in Dec & couldn't make any payments on anything (house or credit cards). The lender suggested a short sale, but I couldn't imagine paying tax on money I'd never see. The credit card companies raised my interest rate to 32% (even before I was late one payment???) ... even if I had an income - I couldn't afford the interest payment much less the monthly paymentS! So I had filed bankruptcy. My back was against the wall and this was the only way I could see any light at the end of this mess. My credit score was 750 before all this! Part Two Next ...
Rita
I'm a realtor. This bill will probably pass but I doubt they're going to make it retroactive.
Talk to your tax advisor (please don't quote me) I think if you've experienced a loss (natural disaster too) it’s deductible. offsetting the income.
Lenders put themselves in this situation giving loans to people who shouldn't have gotten them. Lender, brokers, realtors, title co., and buyers got all wrapped up in the buying frenzy & everyone's paying the price.
Greenspan & Bush created the housing mess by reducing int. rates to the crazy low rates & creating a market that could not sustain itself. They tried to correct it by raising rates, but it's backfired.
The market is adjusting back to where it should be. It couldn’t sustain itself at 20 to 30% per yr value increases! Values will adjust to where it should be & then will start up again.
Jack
What we see here are speculators that made the wrong bets and now expect the taxpayer to bail them out -- most of you above are simply greedy, besides being dumb -- it's OK to be dumb or greedy but not both -- what's especially crude is that each of you would have happily gone to the bank with your winnings but now that you have lost, you expect others to pick up your debt -- fortunately, this bill has no traction and will not pass.
Dave
We're missing a key point. Nobody has mentioned this yet, but the reason this is truly unfair is that you don't get to deduct the loss from the sale of your home! Yet you still have to pay taxes on the forgiveness of debt income (the mortgage company’s loss). With most things, when you sell it for less than you paid for it, you have a loss that you can deduct on your taxes. But that’s not the case with your home.
IT WOULD MAKE SENSE IF THE LOSS FROM THE LOWER SALES PRICE COULD BE OFFSET WITH THE FORGIVENESS OF DEBT.
When you look at the transaction as a whole, these people have lost out. The reason they’re taxed is that the loss on the sale of the home isn’t available to offset the forgiveness of debt income. If we can’t make the offset available because of the way the tax code is set up, then let’s at least get this law passed which accomplishes the same goal of making it fair for these people.
Dave
Furthur, unlike most income you get, forgiveness of debt leaves you with no cash to pay the taxes for it! That goes against one of the concepts of the tax code.
Tom Tillman
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.
Lawyer Mom
I'm an attorney, and a single mother. I bought a house in Southern California after my divorce in early 2006. I've never missed a payment. However, lately I've been in-and-out of the hospital with Crohn's Disease. I won't make October's payment, and it appears that I'll soon be in the same boat as most of the prior posts. My house value has gone down 40% in 20 months! In losing my home, whether it's a Deed in Lieu of Foreclosure, a Short Sale, or a Foreclosure, I will be losing (1) my home; (2) my down payment; (3) the value of the improvements I've made to the home; and (4) my credit (I, too, have a 779 FICO at the moment). So, I should have to pay income taxes on the $260,000 loss, as well? My gut is in knots over this . . .
pacman
What's the deal with H.R. 3648: Mortgage Forgiveness Debt Relief Act of 2007? It jsut passed the house and was introduced into the senate. Check it out. Does this law apply to shortsales? I would think it does.
Kevin
Those of us in certain areas felt that if we didn't move forward and make a home purchase when we did, we would just be facing higher home prices and bigger mortgage payments later on. That was particularly true in California, where prices had been climbing regularly for a long time. We didn't cause that situation and wanted the advantages of homeownership like all those who bought before us. So when we find ourselves in a situation where we can no longer afford the mortgage, why should we be penalized for the shortfall? The mortgage lenders and real estate interests wanted the surge in home purchases and the gov't fostered it as well. So they need to take the good with the bad, that's part of doing business. It's true buyers should learn from their mistakes but the tax on forgiven debt imposes way too much hardship on them, for things they have no control over.
Sick of it all...
I don't understand how this can't go through. Although, I agree, it probably won't be retro-active. (I, too sold on a short sale this year and took a loss of $60,000) So, I'm keeping my fingers crossed. However, if I could afford the tax penalty, obviously I could afford to keep the house!! Hello!!
D
October 5th, 2007:
Good news for individuals who are at risk with short sale or foreclosure....looks as though H.R. 1876 will pass...see attached link from the co-author of bill...
http://www.house.gov/apps/list/hearing/nj01_andrews/mortstate.html
Big Picture
There were never any guarantees that property values would rise in any agreements regarding the sale of real estate in any of the 50 states! If you entered into a LEGAL CONTRACT to purchase a home for an agreed upon price at an agreed upon payment you can not blame anyone but yourself if the value decreases. Anyone who buys a car and trades it in for a newer car while there is still an outstanding balance on the loan knows there will be a negative equity transferred to the new loan. The only reason people are complaining is that they don't want to face up to the consequences for their decisions. It seems rather simple, although unfortunate for some, that if you agreed to pay a price that no one else will currently pay, it's no one elses fault but your own! Not everything in this world can be someone elses fault! Sometimes bad things happen to good people! DON'T BUY WHAT YOU CAN'T AFFORD!!!
Right On
All of you who went out and agreed to pay more than you could afford are now forced to reap what you have sown, BOO HOO, too bad! Don't ask the rest of us to bail you out, because that's what this bill is. It's not right for the government to bail out failed business, and it's not right for them to bail out failed individuals! People need to learn to live within their means, we can't all keep up with "the Jones's". The only reason you lose your home is because you can't maintain a budget, or you never had one to begin with!
ouija
I lost already $80,000 investing or better especulating in a condo in Miami. It is my second home.I cannot keep the payments. Not even mentioning that I lost my marriage because it was my idea on buying this property, I lost my job, I have a 4 months old baby and I dont know what is going to happen my life as many others, is destroyed. We owe $330,000 and there was another condo in the same building sold in a short sale for $210,000. On top of all this mess The legislation doesnt mention anything about SECOND HOMES???????????? OH MY G......
mercuryjewel
Introduced Apr 17, 2007
Scheduled for Debate - Not yet
This bill is in the first step in the legislative process. Introduced bills go first to committees that deliberate, investigate, and revise them before they go to general debate. The majority of bills never make it out of committee.
If you need this bill to pass you need to write, call, or e-mail your representatives.
Kevin
Maybe I am mistaken here, but this ACT will only give relief to phantom income. I don't see how this will burden tax payers other than it will be income that the IRS doesn't get to collect. The loss was to the mortgage lender in most cases or a mortgage insurance company. Obviously the lender or insurance company will claim a loss. However lets keep one thing in mind here...if you require all of these people to pay taxes on phantom income it will only further their financial troubles which could more than cripple our enconomy even worse. Most people will use the money they didn't have to send into the IRS to buy something that will create jobs and collect sales tax and who knows what else. Plus many of these homes will be bought by investors who will eventually pay capital gains taxes on these homes once the market rebounds.
Melissa
When you sell a property through a short sale, the amount forgiven CAN be taxed. However, the lender has to issue a 1099 to the property owner in order for it to be taxed. I work in real estate and have completed at least 20 short sales in the past 2 years and there was a 1099 issued on only ONE (which was later dismissed due to predatory lending practices). Although we would love to see this bill passed, there is no guarantee that you will have to pay tax on the amount forgiven by your lender. If, and only if, they issue a 1099 to you will you need to be concerned about the tax on phamtom income.
J.C.
I don't think this bill should just cover 2007 because here us California there is going to be a landslide of foreclosers in the next year to come. If you ask me people who are losing their jobs will not be able to help losing their homes, how are they supposed to then pay on a Phantom Tax of even 20K to 70K. These people will never recover, and will be stalked by the IRS. Thats not what I beleive our contry to be about. This is the way for people to at least recover and become home owners once again. Yes, I think learning from our mistakes in a definate, but If we can never recover, It will effect everyone!!
vile
You morons spent too much on a house and it's MY cross to bear? Forget it!
It's true - nobody goes hungry in America. Screw you idiots.
Gracie
A realtor told me the other day that this bill has passed, is that accurate, anyone?
Jim V
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. For example, debt cancellation of recourse indebtedness such as money borrowed against your home to buy a car, will result in taxable income regardless if there is debt forgiveness.
Pacman
Fairness? Explain me this. I have lived in my home (principle residence) for over 5 years. I sell it up to a gain of $250,000 (single) and up to $500,000 (married). Now I owe a lot of taxes. Wrong! These gains are excluded under the current law! So I shortsale my house and walk away with nothing and I get a major tax bill (because debt forgiveness is considered income). But if I sold my house for huge profit then it would be considered an excluded capital gain and I owe nothing. For all you naysayers out there please explain to me in what universe does this make any sense at all? Gracie.. a similar bill (H.R. 3648) passed the house. It's in commitee in the Senate. retro to 1/1/07. Write your senator about H.R. 3648!!!
mercuryjewel
Again this bill has not passed and far from doing so. For those of you looking for some help, provided you follow through with a short sale or are thinking about it, you need to look into FORM 982 Insolvency Exclusion. This is not help for every one, but for some it will help reduce the amount taxed by the IRS on the 1099 you will get at the end of the year. Please talk to a tax professional about this. Shady realtors will tell you anything to try to get sales going they are desperate for the business. You should also know about H.R.3915. Mortgage brokers are trying to petition this because it works in favor of the buyers and sellers.Their petition is gaining serious momentum so you need to contact your rep. in support of this bill and let your voice be heard! Very important to all consumers!!!!!!!!!!!!!
MN resident
Does our government do anything???
Is this Act of 2007 going to be
approved by 2009? Yes or no!!!????
WOLFMAN
I WAS RELOCATED FOR WORK, WITH THE MOVE, I ENDED UP WITH A SHORT SALE 16,000 LESS OF WHAT I OWED. SO IS IT FAIR FOR ME TO HAVE TO PAY TAX ON THAT MONEY? I DONT THINK SO.. THE MARKET DROPPED THE SAME TIME MY WORK ASKED ME TO RELOCATE. MY PROBLEM IS WHY SHOULD I BE TAXED ON MONEY ALREADY FORGIVEN BY MY LENDER? HELLOO..AT LEAST WITH A SHORT SALE THE LENDER IS NOT TAKING IT IN THE HIND LIKE A FORECLOSEURE. PEOPLE AND LENDERS SHOULD BE MORE OPEN TO SHORT SALES, 250,000 IS BETTER THEN A KICK IN THE REAR. I FULLY SUPPORT THIS ACT, PUSH IT THROUGH ASAP. THE WOLF
to vile
Morons huh that's wonderful, well I guess all of us morons should just file bankruptcy instead and see how that effects the economy. We build before we sold now who was the morons that gave us a construction loan to do so, the bank and they will write it off so why don't they have to pay for their gamble hum?
no moron
Not all people who got caught in the real estate mess are morons, greedy, stupid or any other deragatory adjective. Some people just wanted a piece of the American Dream and felt they would lose it if they did not buy before prices went higher. Let's lay it on the people who created the mess--greedy developers, real estate agents, appraisers, bankers, city councils. They are after all, the experts. Give Joe Average a break.
HR 3648 not HR1876!
Forget this bill. Write your Senators about THIS>>
http://www.govtrack.us/congress/bill.xpd?bill=h110-3648
This Bill ALREADY PASSED THE HOUSE with major bipartisan support! It is IN COMMITTEE in the SENATE! Much farter along than HR 1876 so forget about this BILL. HR 3648 is RETROACTIVE to January 2007! Write your SENATORS NOW!!!! We only have a couple of weeks. It's now or never people! We are almost there!
kate
One thing I can't understand is why other creditors get in on a person losing their home by jacking up the interest rates on say, credit cards? The mortgage isn't with them, a totally seperate bill. Talk about kicking a person when they're down!This shouldn't be allowed!
steve
check your 1099a form sent to you .I checked with our accountant , and if you deduct box 4 (fair market value ) from box 2 (balance of principal outstanding ) and the product is $o or less, you have no tax liability.
I understand that if we don,t pay our phantom taxes (if due) then the financial imstitution can attempt to colllect the defiency amount.
Glad I'm not Jack
It's sad that some good people got caught up in this. What's worse is you have people like Jack with no compassion in their heart. My nephew put down $50k on his place, had a 720 fico only four years out of college. Now he's upside down and being laid off soon because of the slowing economy. He'll probably get another job soon but there are others that aren't as fortunate. What about them? What about the kids who were forced to buy a home at 30% more than it was worth because they were afraid they would never be able to afford a home, and now has a loan that wont be at equity for at least a decade. My empathy.