Mortgage Amnesty Act? - Mothering Forums

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Old 02-26-2008, 03:09 PM - Thread Starter
 
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Hi all,
A little background:
I'm a first time owner with a property that's been on the market a whole year. It's now worth less than what I paid.
I was concerned that if I do a quicksale or foreclosure, we would get a 1099 from the lender and have to pay taxes on the amount (for example, if I paid $180K and they sold it for $150K, they would send a 1099 for $30K as if they have given me that amount and then I would have to pay 30% taxes on it...you've got it, $9000).
I spoke to a mortgage broker yesterday that told me there was a new amnesty act passed last month for people just like me...people who can't sell their properties, original loans (no refinances). He said that if I get a 1099 now, this Amnesty Act will allow me to just write it off on my taxes without paying the tax.
Anyone know about it? I can't find anything on the web...maybe I'm searching with the wrong terms.

Thanks!

Mel
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Old 02-26-2008, 03:14 PM
 
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you should search for "Mortgage Forgiveness Debt Relief Act of 2007"

That is what you are looking for.

H&R block has a decent explanation: http://www.hrblock.com/taxes/tax_tip...ebtrelief.html
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Old 02-26-2008, 03:16 PM - Thread Starter
 
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Thank you, thank you, Shaggydaddy : )

BTW, Shaggydaddy is a cute username...we have a shaggy daddy in our house too

Thanks again!

Mel.
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Old 02-26-2008, 03:22 PM - Thread Starter
 
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Okay, trying to interpret this thing and hope anyone can help.
It appears that it helps people trying to REFI their mortgage to avoid foreclosure. But I don't see that it would help someone who DOES foreclose avoid taxes on any mortage debt that is cancelled (thus a 1099 from the lender).
Anyone?
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Old 02-26-2008, 04:13 PM
 
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This is what the IRS has to say:

Quote:
Normally, debt forgiveness results in taxable income. But under the Mortgage Forgiveness Debt Relief Act of 2007, enacted Dec. 20, taxpayers may exclude debt forgiven on their principal residence if the balance of their loan was less than $2 million. The limit is $1 million for a married person filing a separate return. Details are on Form 982 and its instructions, available now on IRS.gov.
Here is Form 982:

http://www.irs.gov/pub/irs-pdf/f982.pdf

 

 

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Old 02-27-2008, 02:31 PM - Thread Starter
 
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Okay, looking at the IRS form is more helpful.
It appears that they differentiate between debt discharged due to Title 11 (whatever that is) and non-Title 11 "extent insolvent".
Yikers...who writes this stuff?
Anyone with enough legal know-how able to translate this for me?
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