Principal Residence Debt Forgiveness Income Relief - Nuts, Bolts and Opinions
I just sat through a great class - Tax Update was the topic - yeah I know sounds absolutely horrible but it wasn’t! I learned a lot and one of the top things is about this new provision for taxpayers who get into mortgage trouble and get foreclosed upon. The points that I think (I am not an accountant - call yours or go on line and learn more) are the most important are as follows:
1) It is included in the 2007 Mortgage Relief Act
2) The income forgiveness amount is insane, no income on debt forgiveness up to $2,000,000 - that’s 2
Million
3) The loan can only be secured by the tax payer’s principal residence
4) This relief applies currently to debts discharged from January 1, 2007 through December 31, 2009
5) Second mortgages and equity loans are not included unless the money went towards home
improvement, in most cases it applies to original purchase plus improvements
6) All debt forgiveness reduces the residence cost basis dollar for dollar.
How do you feel about this, I don’t like it - I don’t think this is going to help anyone especially taxpayers. What is going to stop the foreclosed buyer from going out and doing it again? Much in the same way there is nothing in place to make greedy irresponsible financial companies from taking advantage of financially uneducated buyers who trust them.
Can I hear a AMEN to making all financial companies have a fiduciary duty to their clients? The CEO’s and companies who have written the lion’s share of these defaulting loans should be held criminally and financially liable. What would that do; put a few of these predators (yes that’s what they are) in jail and I bet word will spread pretty fast that the American public is not going to just sit on their hands and let this happen again. If that doesn’t work maybe we need to bring back public flogging and stocks to all those greedy enough to risk the stability of our country!
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