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The Mortgage Forgiveness Debt Relief Act and Debt Cancellation
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2012 Sep 21, 2:45am 3,062 views 4 comments
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Raw
2012 Sep 21, 2:52am
The truly desperate ones can always get out of the mess by declaring bankruptcy. The strategic defaulters will be in deep shit.
Dan8267
2012 Sep 21, 3:28am
Isn't it great to get a half million loan, refuse to pay it back, spend the money, and pay no income tax on the entire half million dollars given to you for doing nothing? And people wonder why the economy is in a depression. The whole system is set up to reward parasites and to exploit workers.
HeadSet
2012 Sep 21, 3:51am
I can see where the forgiven principle is taxed as income.
What about taxing the squat time, using the fair market value of what the house would bring in rent? You squat for 10 months in a $2,000/mo house, you get taxed on $20k as income.
Dan8267
2012 Sep 21, 3:54am
What about taxing the squat time, using the fair market value of what the house would bring in rent? You squat for 10 months in a $2,000/mo house, you get taxed on $20k as income.
Yes, and the money should go directly to renters over the past 10 years as refunds for the government propping up housing prices.
This tax forgiveness act is expiring at the end of the year. People here in Las Vegas are only realizing it exists and it's going away, and now they may not get a short sale done in time to make the deadline. Like elliemae says, so many people here are just so overwhelmed. They're living mortgage/rent free and in the case of the truly desperate that's what's helping them right now. The strategic defaulters may not realize the eventual consequences (or maybe they figure they'll still come out ahead.)
http://1.usa.gov/UHWHtO
From the IRS web page:
The Mortgage Forgiveness Debt Relief Act and Debt Cancellation
If you owe a debt to someone else and they cancel or forgive that debt, the canceled amount may be taxable.
The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.
This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.
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There was hope here that it would be extended, but the latest word is that since it really only helps a few states, it won't be. For the amount some of these people might be forgiven, it will be a hell of a tax bill and you can't go bankrupt on the IRS.
Owner lives free for five years. Payments waived! Bank America reduce mortgage principal.
http://bit.ly/QGo2Ke
No payments for five years ($64K) - they were forgiven, then Bank of America reduced the mortgage principal by $232K.
#housing