Senate's Mortgage Tax Relief Bill

The Mortgage Tax Relief bill passed by the Senate by unanimous consent on Friday would provide a three-year exclusion from income for debt forgiven as a result of a mortgage foreclosure or renegotiation, as well as a three-year extension of the deduction for private mortgage insurance:

• Legislative Text
• Estimated Revenue Effects

See Tax Prof Deborah Geier's testimony at Thursday's Senate hearing:

I am pleased to have the opportunity to discuss with you the tax consequences that arise on debt foreclosure or workout pertaining to a principal residence. I shall discuss the rules that apply to debt-discharge income generally, how those rules apply in the specific context of debt pertaining to a principal residence, and why I believe that the relief provided in The Mortgage Forgiveness Debt Relief Act of 2007 (H.R. 3648), passed by the House of Representatives on October 4, 2007, is justifiable, except that I believe that—for conceptual reasons rather than revenue reasons—the relief should be temporary. Moreover, it would be conceptually defensible to dispense with the basis reduction required by H.R. 3648, though whether or not basis is reduced would likely have few real-world consequences. I explore each of these points below.

Press coverage:

• Associated Press
• Bloomberg
• L.A. Times
• Reuters