Friday, January 28, 2011
Taxpayers who purchase homes are taking the risk that one day they may not be able to afford their mortgage, that the value of their home may decrease (however unlikely this may be), and that if both occur, the taxpayer may get less back on the sale of the house while remaining personally liable to the bank for the outstanding debt. However, where the bank releases the taxpayer from liability, the taxpayer realizes a gain in assets that otherwise would be used to secure the debt. If the taxpayer is not bankrupt nor insolvent, then he or she should have to pay the resulting tax liability immediately because, by definition, he or she can afford to do so. Simply because “so many homeowners are losing their homes” does not mean that the government should provide “temporary relief” by excusing the homeowners from their tax liabilities. Such a provision does not comport with a “common sense” reading of § 108.