Friday, January 18, 2013

Charles Ware Law Update: Section 202 of the American Taxpayer Relief Act of 2012

Published by the national law offices of Charles Jerome Ware, P.A., Attorneys and Counsellors.

Attorney Charles Jerome Ware is renowned and consistently ranked among the best attorneys and legal counsellors in the United States. [GQ Magazine, The Washington Post, The Baltimore Sun, The Columbia Flier, USA TODAY, The Howard County Sun, The Anniston Star, The New York Times, et al.]

www.CharlesJeromeWare.com
The provisions of the Mortgage Forgiveness Debt Relief Act of 2007 that deal with "mortgage debt forgiveness" have been extended though all of 2013 to January 1, 2014.

This debt forgiveness extension will exempt from federal taxation mortgage debt that is forgiven in a loan modification, short sale or deed-in-lieu of foreclosure.

This extended relief is provided in Section 202 of the American Taxpayer Relief Act of 2012 (H.R.8):

SEC. 202. EXTENSION OF EXCLUSION FROM GROSS INCOME OF DISCHARGE OF QUALIFIED PRINCIPAL RESIDENCE INDEBTEDNESS.
    (a) In General- Subparagraph (E) of section 108(a)(1) is amended by striking ‘January 1, 2013’ and inserting ‘January 1, 2014’.
    (b) Effective Date- The amendment made by this section shall apply to indebtedness discharged after December 31, 2012.

It appears now that more homeowners will be able to move in 2013 because of this continued short sale tax benefit.

When somebody owes more on their home than what it is worth, they should do a short sale. This will typically be the best solution to have the lightest impact on their credit and their future ability to buy a home.
But without the short sale tax benefit, sellers would have to pay income tax on any debt that was forgiven by the lender. This would cause people to stay in their homes for many more years, thus removing them from the market as sellers and as buyers.
More than 40% of all buyers have a home to sell first, and if the majority of this segment doesn’t get the short sale tax relief, then they are not going to move. This is why home sales have been so slow in recent years, as many homeowners who want to move simply could not.
But with the continuation of the short sale tax benefit, hopefully the majority of upside down homeowners through the market this year can move into new homes.
[www.irs.gov/The Mortgage Forgiveness Debt Relief Act and Debt Cancellation; Publication 4681, Cancelled Debts, Forceclosures, Repossessions, and Abandonments, et al.; www.gop.gov/fdsys/pkg/BILLS/ January 1, 2013; www.businessinsider.com/American Taxpayer Relief Act of 2012]

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