Friday, August 31, 2007
Last week, I blogged the tax aspect of the sub-prime mortgage problem: taxpayers often have discharge of indebtedness income upon foreclosure of their homes. The post included detailed commentary by Tax Profs Bryan Camp (Texas Tech), Sheldon Cohen (Farr, Miller & Washington; former IRS Commissioner), Linda Galler (Hofstra), Stuart Lazar (Tulane), Jim Maule (Villanova), Marty McMahon (Florida), and David Shakow (Penn).
President Bush today announced his suppport for a proposed amendment to § 108 to provide relief from discharge of indebtedness income for taxpayers who lose their primary residences to foreclosure. The Mortgage Cancellation Relief Act pf 2007 (H.R. 1876; S. 1394). From the White House Fact Sheet: New Steps to Help Homeowners Avoid Foreclosure:
The President Calls On Congress To Change A Key Housing Provision Of The Federal Tax Code So It Does Not Punish Families Who Are Forced To Sell Their Homes For Less Than Their Mortgage Is Worth. Current tax law counts cancelled mortgage debt on primary residences as taxable income. For example, if the value of a home declines and $20,000 of the homeowner's loan is forgiven, the tax code treats that $20,000 as taxable income. The President proposes temporary relief to ensure that cancelled mortgage debt on a primary residence is not counted as income.
- The President Is Working With Congress In A Bipartisan Fashion To Make This Important Change. Senator Debbie Stabenow (D-MI), along with Senator George Voinovich (R-OH) and others, has introduced a bipartisan bill that would protect homeowners from having to pay taxes on cancelled mortgage debt. In the House, Representatives Rob Andrews (D-NJ) and Ron Lewis (R-KY), along with several of their colleagues, have introduced similar legislation. The President looks forward to working with Congress to reach agreement on a bill, so we can deliver this vital tax relief to American homeowners.