H.R. 8: American Taxpayer Relief Act of 2012 passes the house. What about Foreclosure

[miserable]

Seems the Mortgage Forgiveness Debt Relief Act of 2007 is extended for one year under Hr 8 (Tax Relief aka Fiscal cliff)...but the language is confusing. Any CPA or tax lawyer can shed some lights please?

http://www.govtrack.us/congress/bills/112/hr8/text

[danello]

It seems they did extend it for one year

TITLE III--BUSINESS TAX EXTENDERS
Sec. 301. Extension and modification of research credit.

Sec. 302. Extension of temporary minimum low-income tax credit rate for non-federally subsidized new buildings.

Sec. 303. Extension of housing allowance exclusion for determining area median gross income for qualified residential rental project exempt facility bonds.

Sec. 304. Extension of Indian employment tax credit.

Sec. 305. Extension of new markets tax credit.

Sec. 306. Extension of railroad track maintenance credit.

Sec. 307. Extension of mine rescue team training credit.

Sec. 308. Extension of employer wage credit for employees who are active duty members of the uniformed services.

Sec. 309. Extension of work opportunity tax credit.

Sec. 310. Extension of qualified zone academy bonds.

Sec. 311. Extension of 15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements.

Sec. 312. Extension of 7-year recovery period for motorsports entertainment complexes.

Sec. 313. Extension of accelerated depreciation for business property on an Indian reservation.

Sec. 314. Extension of enhanced charitable deduction for contributions of food inventory.

Sec. 315. Extension of increased expensing limitations and treatment of certain real property as section 179 property.

Sec. 316. Extension of election to expense mine safety equipment.

Sec. 317. Extension of special expensing rules for certain film and television productions.

Sec. 318. Extension of deduction allowable with respect to income attributable to domestic production activities in Puerto Rico.

Sec. 319. Extension of modification of tax treatment of certain payments to controlling exempt organizations.

Sec. 320. Extension of treatment of certain dividends of regulated investment companies.

Sec. 321. Extension of RIC qualified investment entity treatment under FIRPTA.

Sec. 322. Extension of subpart F exception for active financing income.

Sec. 323. Extension of look-thru treatment of payments between related controlled foreign corporations under foreign personal holding company rules.

Sec. 324. Extension of temporary exclusion of 100 percent of gain on certain small business stock.

Sec. 325. Extension of basis adjustment to stock of S corporations making charitable contributions of property.

Sec. 326. Extension of reduction in S-corporation recognition period for built-in gains tax.

Sec. 327. Extension of empowerment zone tax incentives.

Sec. 328. Extension of tax-exempt financing for New York Liberty Zone.

Sec. 329. Extension of temporary increase in limit on cover over of rum excise taxes to Puerto Rico and the Virgin Islands.

Sec. 330. Modification and extension of American Samoa economic development credit.

Sec. 331. Extension and modification of bonus depreciation.

[danello]

Also this article confirms it
WASHINGTON -- The Senate version of the legislation to avert the so-called fiscal cliff is littered with favors for select corporations. But it also includes a prime provision for troubled homeowners who receive mortgage relief from their banks.

Without the special clause, the limited foreclosure relief efforts that are currently in the works would be extinguished. Banks have been extremely reluctant to grant families debt relief on mortgages facing foreclosure. But tax policy is poised to poison any debt relief that borrowers could receive from banks -- unless Congress acts.

Millions of homes are worth far less today than what buyers paid for them during the housing bubble. Banks can often save money for themselves and investors by writing down the value of a troubled mortgage to the current value of the house -- thus averting costly foreclosure expenses. At midnight on January 1, 2013, the tax policy for this relief changed. Any debt that banks forgave would be counted as ordinary, taxable income for the borrower. If a $300,000 mortgage is written down to a $200,000 current home value, the homeowner is suddenly burdened with a tax bill for $100,000 in income.

As a result, a homeowner struggling to pay the bills would be faced with tens of thousands of dollars in taxes. That would destroy any hope of establishing future mortgage debt relief for troubled homeowners, as any bank leniency would result in heavy tax trauma for borrowers.

But the Senate version of the fiscal cliff bill would delay this tax policy change for a year. If the deal passes the House, the few mortgage modifications that are currently in the works will be able to proceed.

http://www.huffingtonpost.com/2013/01/01/fiscal-cliff-homeowners-senate-bill-_n_2393887.html

[Risky]

Yes it did get extended until dec 31, 2013.

"Little attention has been given to a key part of the fiscal cliff deal approved by Congress today, an extension that prevents distressed homeowners from being taxed on forgiven mortgage debt.

The exception for “qualified principal residence indebtedness” was created by the Mortgage Debt Relief Act of 2007 and applies to most homeowners whose mortgages have been restructured to prevent foreclosures, or those who have gone through “short sales,” selling their homes for less than what is owed in mortgages.

The exception allows homeowners to exclude from their income certain cancelled debt on their principal residence.

The relief act’s extension was seen as vital to the recovering housing market. Short sales nationwide had been surging in anticipation of the exception’s end on Dec. 31. The exception will now expire on Dec. 31, 2013.

Normally, debt that is forgiven or cancelled by a lender must be included as income on your tax return and is taxable."

The maximum amount you can treat as qualified principal residence indebtedness is $2 million ($1 million if married filing separately for the tax year), at the time the loan was forgiven.
htp://ecreditdaily.com/2013/01/forgiven-mortgage-debt-remains-untaxed-year/

[advanced]

I have received a debt settlement on my mortgage (3rd) on Dec 30 but I have not paid yet, I was worried about tax implications. Am I covered now?

[shah]

Topic: GOOD NEWS! IRS Provisions on Cancellation of Debt on Primary Home extended to 12.31.2013 i.e. One More Year!

Dear Friend,

If you experienced a Short Sale, Foreclosure or walked away from your property & get a 1099-C or a 1099-A from the IRS for 2012, make sure you connect with your CPA and ensure proper treatment of the Deemed Income from Forgiven or Cancelled Debt to avoid tax on it.

The Good News about the House & Senate agreeing on the Fiscal Cliff issue earlier today is that the IRS Provisions due to expire on 12.31.2012 has now been EXTENDED BY A YEAR to 12.31.2013.

This is GOOD NEWS for those contemplating scenarios of Short Sale (due to their Primary Home being 'under water' i.e. you owe more on your home than its current assessed property value) or you are in Foreclosure or you have Abandoned i.e. Walked Away from your property, then please be reassured that the IRS Provisions of cancellation of debt and resulting Deemed Income provisions favoring you have been extended until 12.31.2013. Here is a link to read more about it. http://ecreditdaily.com/2013/01/forg...ZjwqA.facebook

If you wish to know more details or consult with me you are welcome to email me [email protected] or call 1.408.759.7049.

It's important that you get proper professional advice from a CPA on such matters.

I hope you find this information useful.

Wishing all readers a Very Happy New Year!

With Regards,

Koshy P.George, CPA
Certified Public Accountant
www.kpgcpa.net

[shah]

Seems the Mortgage Forgiveness Debt Relief Act of 2007 is extended for one year under Hr 8 (Tax Relief aka Fiscal cliff)...but the language is confusing. Any CPA or tax lawyer can shed some lights please?

http://www.govtrack.us/congress/bills/112/hr8/text

Video Answers

[jaywatson]

With the increasing stability of housing prices throughout the U.S., most banks and sellers are getting much more comfortable with the value of their properties. Most person debt becomes unmanageable and bankruptcy seems inevitable. One last option is debt forgiveness, most lenders can forgive debt in some situations, if a borrower reaches the right agreement. Debt forgiveness is a good thing for many people, as it means less than the whole of a debt has been paid though the debt has been satisfied. However, it's regarded as taxable income and the mistake of a debt forgiveness tax break for foreclosures or short sales of homes is set to bite some taxpayers. Check out more at Debt forgiveness will kick a lot of people in the shins.