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S. 1394, The Mortgage Cancellation Relief Act of 2007 (15 comments ↓)
- This bill 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.
- This item is from the 110th Congress (2007-2008) and is no longer current.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.
S. 1394 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
Linda Viglione
August 2, 2007, 6:28pm (report abuse)How can a loss be construed as income? If someone cannot afford to keep the roof over their head, how can they afford to pay income tax on imaginary income? And this is not just happening to investors as the media would like us to think. People are losing their homes. Hmm, when you're struggling, the government shouldn't add to your burden.
R Bush
August 24, 2007, 11:00pm (report abuse)This act should be passed immediately. People losing their homes to foreclosure and experiencing these "phantom gains" should not have to pay taxes on the "non" gain. Everyone should write their congressperson and get them to pass this law now!
J
August 31, 2007, 2:46pm (report abuse)People shouldn't think taxing the gain from debt cancellation is an evil scheme. The lender will take a bad debt deduction after the loan is forgiven, which means the gov will lose tax dollars that ordinarily would be paid by the lender. You agree to pay the balance of a loan. Now you can't, and the lender forgives it. They have lost money and will claim a deduction. You have gained money and should pay tax on it. Otherwise, all American taxpayers end up paying for the bad financial planning of thousands of homeowners who stupidly refinanced to take vacations, pay off credit cards and buy cars.
Linda Martinez
September 5, 2007, 9:20pm (report abuse)My family is in this situation right now. WE thought we were doing the right thing by not foreclosing only to find 2 years later the IRS wants over $14,00 from us plus interest adding up daily. I of course can not pay this bill and need help and hope this bill passes for others that found themseleves ripped off by mortgage brokers who knew I would never be able to afford my payments. I understand ignorance of laws is not acceptable. But if I could not pay my mortgage how in God's name can I pay this debt?
jim
September 22, 2007, 2:57pm (report abuse)I can't understand why you want the rest of us to pay for your gamble. You got money from the bank, you bet it on a house. You lost the bet. now you want to walk away free. Can I get the same deal for my bets in the stock market, better yet how about my bets in las vegas. My god, I sympathize with the situation as i did a short sale too, but I take responsibility for results of my decision.
Dave
October 4, 2007, 11:43am (report abuse)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
October 4, 2007, 11:46am (report abuse)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.
Dave
October 4, 2007, 11:52am (report abuse)Jim, when you gamble and lose in the stock market, you don't have to pay taxes for it. Why should these people that have lost have to pay taxes?
By the way, the people that gambled with investment properties and lost...they can deduct the loss from the sale. It's only when it involves you main home that you get trapped by this situation.
Thresa
October 11, 2007, 2:57pm (report abuse)How would a short sale affect credit. I'm told by my mortgage company that it will affect my credit in some way, but no one seems to know how much.
David
October 11, 2007, 3:40pm (report abuse)I sympathize with some homeowners who have lost the equity in their home. Unfortunately, there are those who borrowed on the equity when the home was worth more. Sometimes, they used the money to buy investment properties, start businesses, pay other bonafide bills, such as college tuition, auto loans, etc. Now, they just get to walk away from the debts only, even though that business they started is making money or the investment they bought is doing well. Where do you draw the Line? Oh, I know! Let's make everyone else pay!
Peter
October 29, 2007, 12:04pm (report abuse)These people who need to sell short are not wealthy industrialists or investors -- they are people whose homes lost equity, they fell on hard timnes, anf their lender is willing to forgive some amount of their debt. Theye are the last people able to pay a huge tax payment on phantom income.
Joe
December 11, 2007, 9:30pm (report abuse)It's a shame people have a to bad attitude, but if it were happening to them, how would they side? They would be the biggest cry babies on the board. If it don't involve you shut the f.... up
Pearl Ahlquist
December 31, 2007, 5:38pm (report abuse)Realtor of Sacramento of 17 years, I specialize in SHORT SALES. Thank GOD there is a way out. I knew this was coming when the Mortgage company offered 110% loans and 1% loans ect.there was bound to be a reaction to the se actions it was just a matter of time. If you need any help email me at www.realtydoctor.us
Pearl Ahlquist
December 31, 2007, 5:39pm (report abuse)Realtor of Sacramento of 17 years, I specialize in SHORT SALES. Thank GOD there is a way out. I knew this was coming when the Mortgage company offered 110% loans and 1% loans ect.there was bound to be a reaction to the se actions it was just a matter of time. If you need any help email me at www.realtydoctor.us
Tammy
January 5, 2008, 12:09am (report abuse)This bill can not pass soon enough!!!I am a realtor and the sadness that I see on a daily basis because of job loss....I do not think this large portion of the population meant to default on their mortgage....They were mis-led and remember when the housing market is down it affects many industries and therefore jobs. Until you are in this situation or see it first hand it is harsh to make such stong statements! The mortgage companies reaped the benefits lied to people and collected high-high interest rates now they are just paying it back. As far as you as the consumer you are not paying for it you are reaping the benefits as well I am sure you have refinanced to the lower rates if you can. Well the people that are in trouble are the reason the rates are so low to begin with. Believe me I can go on and on but you are not paying for it but indeed reaping the benefits.