“Phantom Tax”

[Peace]

Bi-partisan support for eliminating the IRS tax on discharged debt.

U.S. House of representatives is debating this now – watch on C-Span right now.

I don’t know how I feel about this – I don’t like anything that portrays home buyers as “victims” but I can also see that the IRS tax on the discharged debt is insult to injury.

I believe that most of the people losing their homes got in over their heads due to their own foolishness.

But there are also some people who have run into hard times due to a crisis and they need help.

[FoamFinger1]

“I believe that most of the people losing their homes got in over their heads due to their own foolishness.”

Some even heloc’d their way into new BMW’s and motorhomes and boats. They get to keep all this without any ‘tax acknowledgement’ of the gains required to purchase these items.

“But there are also some people who have run into hard times due to a crisis and they need help.”

There is BK for those on hard times and I have no problem with those situations. Although, Driving your new $85K BMW to the marina to sail around your new $200K boat, all income tax free should be against the rules.

[bsrsharma]

I don’t have a problem as long as it is only for non-recourse loans. i.e. no HELOC/Re-fi hanky panky. Plain homer buyers who did a stupid transaction deserve tax forgiveness. If needed, this can be combined with bankruptcy law to prevent any asset siphon off cases.

The simpler folks deserve sympathy for another reason. Think of all those multi-million $ homes (like the ones that fell in La Jolla); when they go upside down, don’t think the fat cats get creamed. They would have corporatized/trustified/off-shored all their assets so that they win any appreciation and let the lender eat any loss. Hence, letting fat cats unscathed and punishing Joe (& Jill) 6P is unfair and borders on unethical/immoral.

[patientlywaiting]

bsrsharma, how about an executive whose corporation gives him $15 million mortgage to buy a house? 100% financing. Two years later, the board votes to forgive the debt. Nice tax free compensation. Win, win for the executive and the corporation.

Sure you can limit it to $500k or whatever. But that’s better than nothing for the people who have good tax accountants.

[FoamFinger1]

“how about an executive whose corporation gives him $15 million mortgage to buy a house?”

How about a housing allowance to a CEO since 1995? 12 years of this nonsense…

[SD Realtor]

When the game doesn’t work anymore simply change the rules of the game.

We will see much more of this.

I don’t agree with ANY of it.

SD Realtor

[Alex_angel]

George Bush doesn’t care about black people

[patientlywaiting]

” How about a housing allowance to a CEO since 1995? 12 years of this nonsense…”

Housing allowance is in-kind compensation and is taxable under current law (except for ordained clergy). So a corporation can give a fat housing allowance to an exec but it wouldn’t be tax free.

[sdsundevil]

according to black people, nobody cares about black people.

[bsrsharma]

corporation gives him $15 million mortgage to buy a house?

The corporation holds the title, executive is the borrower.

 100% financing. Two years later, the board votes to forgive the debt.

The Corp. still owns the house. Is there anything in the proposed bill where the borrower gets to keep the house?

 Nice tax free compensation. Win, win for the executive and the corporation.

How? The executive paid mortgage, right? The Corp paid for the house and keeps the house.

Why go through all this roundabout? The Corp can buy the house outright and "rent" it to the exec for a small rent. Kind of like White House where rent  is 0. Trust me, the Corp & Exec have loopholes broad enough to sail an oil tanker through. This is really small potato stuff.

[Peace]

Looks like this will pass “Mortgage Debt Tax Relief”

It will be paid by changing the tax benefits of selling a second house – now if you sell your primary residence and take the capital gains benefit, then you live in your second home for two years and sell you can only take the capital gains tax benefit for that portion of time you lived in the second house.

[(former)FormerSanDiegan]

It will be paid by changing the tax benefits of selling a second house – now if you sell your primary residence and take the capital gains benefit, then you live in your second home for two years and sell you can only take the capital gains tax benefit for that portion of time you lived in the second house.

Peace – where did you find this nugget ?

[SD Realtor]

Good catch FSD…

SD Realtor

[Peace]

FormerSanDiegan

I was watching the debate on C-Span (very bi-partisan by the way), and once in awhile C-Span breaks away from the live viewing and gives a synopsis of what is going down – it was during the summary that I heard that to pay for the debt forgiveness they were countering with the limit of second home capital gains savings. Maybe this has to do with Pay-Go.

I don’t have a problem with IRS not taxing discharged debt on first mortgages. But I have a huge problem with not taxing discharged debt on re-fi’s and HELOCs, etc. that were used to support a standard of living beyond income (as someone else mentioned); I didn’t hear those specifics (whether it was just for first mortgages or all debt)

[Peace]

H. R. 3648

http://tinyurl.com/39tos4

Someone out there who would like to decifer this Bill.

Section 5 appears to be where there will be defining limits on the capital gains savings when selling a primary residence. I can’t figure it out but what I heard made it sound like it would affect those who have a second home and after selling the first (primary residence) and taking the capital gains savings, then move into the second for two years to establish primary residency wolud not get the entire capital gains break.

[cr]

If they give tax benefits of any form to people facing foreclosure, then I want a tax break on money I am trying to save to buy a home I actually CAN afford.

Free market capitalism my ass.

[Fearful]

All they have to do is allow a capital loss on a your primary residence and most if not all of this debt forgiveness issue would disappear.

It is a mystery to me how you can get a capital gain on a house, $250 / 500K exclusion notwithstanding, but not a capital loss.

[Author]

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