Debt Forgiveness Act (AKA screw those who sell their second home Act)

[SD Realtor]

You didn’t really think that the feds would give up a precious source of income did you? Well it is true, they will now forgive idiots for losing money but they will collect that lost revenue from those who intend to purchase a second home after 2008.

Currently if you own a second home you would have to occupy it 2 out of the past 5 years if you wanted to sell it and reap the benefits of the capital gains exclusion. Well HR3648 which is sponsored by democrat Charles Rangel and is very likely going to pass.

So now as I understand it, (and I could be wrong) for properties that are acquired and used as second homes after Jan 1 and are later converted to a principal residences and then sold, only the period when the property was actually used as a principal residence will count towards the capital gains exclusion computation.

Fortunately homes purchased before 2008 would be grandfathered. (whew)

[temeculaguy]

As i understand it, this would fly in the face of trying to prop up the market and will do an incredible amount of damage to current values by making R/E less attractive, especially to investor sized homes (rentals), the very market that Rangel wants to protect, doesn’t he have staffers that look into this stuff for him. If you take away the possible tax free investment property or vacation home, I would be less inclined to buy one as would many others. Who needs fundamentals to cause the market to crash when we have the government to accelerate it. I’m taking back all of my 2009 predictions, I give it two weeks after all this legislation is passed. 50% off by the ides of march, final answer.

[temeculaguy]

As i understand it, this would fly in the face of trying to prop up the market and will do an incredible amount of damage to current values by making R/E less attractive, especially to investor sized homes (rentals), the very market that Rangel wants to protect, doesn’t he have staffers that look into this stuff for him. If you take away the possible tax free investment property or vacation home, I would be less inclined to buy one as would many others. Who needs fundamentals to cause the market to crash when we have the government to accelerate it. I’m taking back all of my 2009 predictions, I give it two weeks after all this legislation is passed. 50% off by the ides of march, final answer.

[Coronita]

Although quite alarming of this proposal, I'm curious as to how they are actually going to implement it if it does pass.

1) How will they truely determine when you started considering a second home the "primary" resident? For example, if you had more than 1 residence in the same city.

 

2) How will Uncle Sam determine the fair market value of that home the day you started considering it a primary home? Because, the gain is no longer tied to purchase history, but rather than a arbitrary point in time when you decide it was a primary residence, is the IRS going ot staff up appraisers?

Seems like a lot of gray area that accountants and auditors will have a field day with.

 

I wouldn't worry about it. Folks will quibble over some technicality, and it probably won't pass. 

[Coronita]

Although quite alarming of this proposal, I'm curious as to how they are actually going to implement it if it does pass.

1) How will they truely determine when you started considering a second home the "primary" resident? For example, if you had more than 1 residence in the same city.

 

2) How will Uncle Sam determine the fair market value of that home the day you started considering it a primary home? Because, the gain is no longer tied to purchase history, but rather than a arbitrary point in time when you decide it was a primary residence, is the IRS going ot staff up appraisers?

Seems like a lot of gray area that accountants and auditors will have a field day with.

 

I wouldn't worry about it. Folks will quibble over some technicality, and it probably won't pass. 

[bsrsharma]

What population (both in numbers as well as % of voters) owns second homes that may be subject to this rule? I don’t think that would be very large, since the bill seems to be sailing through the House & Senate pretty smoothly. There wasn’t even much of a debate, no threats of amendments, filibusters, vetoes .. nothing. So politically, this must be very popular & safe.

[bsrsharma]

What population (both in numbers as well as % of voters) owns second homes that may be subject to this rule? I don’t think that would be very large, since the bill seems to be sailing through the House & Senate pretty smoothly. There wasn’t even much of a debate, no threats of amendments, filibusters, vetoes .. nothing. So politically, this must be very popular & safe.

[SD Realtor]

FLU as you know I am a betting man and I would even give you odds if you want them that this will pass. Your questions about implementation are quite valid. My understanding is that it would apply for properties purchased after 1/1/08 for second homes/investment properties. Again, your questions are valid but I do feel it will pass… It is a nice little barb at the end of the hook though isn’t it?

SD Realtor

[SD Realtor]

FLU as you know I am a betting man and I would even give you odds if you want them that this will pass. Your questions about implementation are quite valid. My understanding is that it would apply for properties purchased after 1/1/08 for second homes/investment properties. Again, your questions are valid but I do feel it will pass… It is a nice little barb at the end of the hook though isn’t it?

SD Realtor

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