Short Sale Information On Mortgage Debt Forgiveness

By
Real Estate Agent

the H.R 3648 Bill should be introduced to law very soon and will greatly help those consumers that sold short on a mortage in the past year.  Here is what I have found up to date:

Bill Status

Bill Text:Summaries (CRS, PVS) Full Text
Status:
IntroducedSep 25, 2007
Scheduled for DebateSep 26, 2007
Amendments (2 proposed) [details]
Passed House [details]Oct 4, 2007
Passed SenateDec 14, 2007
Differences Resolved-
Signed by President-
The bill may now proceed to a conference committee of senators and representatives to work out differences in the versions of the bill each chamber approved. The bill then goes to the President before becoming law. [Last Updated: Dec 18, 2007]
Last Action:Dec 18, 2007: On motion that the House suspend the rules and agree to the Senate amendment Agreed to by voice vote.

This information is being brought to you, courtesy of the following website: 

http://www.govtrack.us/congress/bill.xpd?bill=h110-3648

This is a follow up post to show the progress of this bill as it is passed through to become a law.  This will greatly help many people who are in the middle of doing a short sale or are thinking bout doing a short sale as they will no longer be responsible for the taxes on the amount of debt forgiven by the mortgage company.

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Groups:
Pre-foreclosure Market
Tags:
short sale
mortgage debt
foreclosure
debt forgiveness

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Rainmaker
234,549
Joel Bennett
The Joel Bennett Group
Long & Foster Real Estate Inc.
Unfortunately this relief act comes too late for some and only scratches the surface of what's needed.
December 20, 2007 06:19 AM
Rainmaker
573,888
Neal Bloom
Realtor CRS-Weston FL Real Estate
Keller Williams Properties, Weston FL
My client just sold short and I explained they might be sent a 1099 but not every bank sends them...but i had to disclose that they need to talk to an accountant. Thanks for the update!
December 20, 2007 06:35 AM
Rainer
13,464
John Youker

I believe this may be retroactive for the year this entore year, so it will help everyone who had a short sale this year.

As far as talking to an accountant, that is the best advice.  They can also file financial insolvency, which many of these people are.  The form from the IRS is form 982, and can be found here: 

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

Also, bankruptcy is an automatic insolvency, so for those who have filed bankruptcy, there should be no problems with this issue, but have them check with their bankruptcy attorney on that subject.

Teh full text of the bill can be found here, as there is much more to it than just the relief from the forgiven debt as taxable income:

http://thomas.loc.gov/cgi-bin/query/D?c110:6:./temp/~c110qBeRs0::

I have completed a few and I am working on several other short sales that this law will make a huge difference.  Most of the people that I am working with will have no problem proving financial insolvency, but for others who are trying to rebuild their lives and their credit - many of whom were the victims of a predatory lending scam or simply had an adjustable rate mortgage that went up to the point of not being able to afford it anymore.

December 20, 2007 09:29 AM
Rainmaker
1,162,061
Joe Jackson
Clintonville and Central Ohio Real Estate Expert
Keller Williams Capital Partners Realty
I have been told by a qualified accountant who use to work for the IRS that the debt is not taxable IF the seller can prove they are insolvent. I told my short sell sellers that they-must see an accountant to do their taxes. I believe I am going to get a disclosure signed stating that I did advise them to do so.
December 25, 2007 05:51 PM
Rainer
13,464
John Youker

Joe,

I agree with you on this one!  I always advise them of this too.  There is a specific form from the IRS, form 982, that they can fill out and have their account verify to prove financial insolvency.  CLICK HERE to find a copy of this form.

Hopefully, this bill will be passed into law soon and their will not be an issue with this anymore.

December 26, 2007 11:14 AM
Rainmaker
454,368
Wendy Rulnick
Destin FL Real Estate
Rulnick Realty, Inc.
John, I think it's a good thing, but it must be extended to investment property, too.  My area is mostly resort, second home, etc.  Most of the people that lost in the market weren't high-rollers and are struggling badly.
January 21, 2008 05:06 PM
Anonymous
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Rainer
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John Youker

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