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As end nears for housing tax break, sellers race the clock
Tampa Bay Times ^ | 12/15/2012 | Drew Harwell, Times Staff Writer

Posted on 12/15/2012 3:05:29 PM PST by memyselfandi59

Since 2007, distressed homeowners have dodged massive bills due to a tax-time saving grace: The debts they were "forgiven" in foreclosures, short sales or principal reductions were also scrubbed from their dues to Uncle Sam.

But that tax break is set to expire Dec. 31, and with it more than $1 billion in tax savings to homeowners in trouble.

Foreclosed? You'll pay taxes on the money you owed the bank. Close on a "short sale" for less than you owed on your mortgage? You'll still owe part of it to the IRS. Even homeowners whose loan principals are trimmed would see that reduction tacked onto their taxable income.

(Excerpt) Read more at ...

TOPICS: News/Current Events
KEYWORDS: housing; housingcrsis; mortgagecrisis; mortgages; obama; obamanomics; taxes
My question is, folks payed this tax before 2007, then came the exemption. Had the housing bubble burst in 2007, and houses were underwater? I thought the underwater house prices came later than 2007. Someone enlighten me.
1 posted on 12/15/2012 3:05:37 PM PST by memyselfandi59
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To: memyselfandi59
Debt cancelled and not collected is income to the debtor.

Below-market rent charged to a tenant is income to the tenant. If you trade a case of .45 ACP for a case of canned peaches, the difference in value is income to the purveyor of the canned peaches.

All is subject to taxation and always has been.

Ever since the federal government figured out they could jail and confiscate the assets of somebody like Al Capone for income tax evasion, we have all been subject to this, it's just that "advances" in technology and data mining have made more of us subject to it.

2 posted on 12/15/2012 3:39:45 PM PST by elkfersupper ( Member of the Original Defiant Class)
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To: memyselfandi59

What a scam.

Own a house - let’s bought for $300,000.

The value of the house went up to $500,000. Take out home equity loan for $200,000.

Value of house declines to $300,000. Short sale for $300,000. Bank has sold the mortgage to the US Government. Taxpayers take the hit.

Walk away with a FREE $200,000 that you do not even have to pay taxes on.

The free sh*t army on the move. And they vote.

3 posted on 12/15/2012 4:30:02 PM PST by 2banana (My common ground with terrorists - they want to die for islam and we want to kill them)
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To: elkfersupper

That is why the Founders were against direct taxation. Government can tax you for anything now.

How’s that working out for us?

4 posted on 12/15/2012 4:38:13 PM PST by Lets Roll NOW (A baby isn't a punishment, Obama is)
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To: memyselfandi59

On a transfer of the property, the debt relief, up to the fair market value of the property, is considered deemed sales proceeds (Regs. Sec. 1.1001-2(c) Example 8). If the debt is nonrecourse, all of the debt relief on a transfer of the property is considered sales proceeds (Regs. Sec. 1.1001-2(c) Example 7). That part of the debt relief is not eligible for the exclusion. Even when the special exclusion expires for the remaining debt relief at the end of 2012, the exclusions for debts discharged in bankruptcy or while insolvent (to the extent of the insolvency) will not expire. The exclusion from gross income unbder Sec. 108 for the discharge of indebtedness that would usually be included in gross income under Sec. 61(a)(12) is really a deferral rather than a true exclusion. The taxpayer must reduce tax attributes to the extent of the exclusion and report them on Form 982.

5 posted on 12/15/2012 5:56:43 PM PST by TheCPA (Author of the forthcoming book Tax Savings Prescriptions)
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