Those With Two Houses Having To Support Foreclosure Victims

With foreclosures marching on at a relentless pace the authorities are sitting up to the realities that are affection all sections of society and the economy at large. The neighbourhoods are deserted with drug addicts and vagrants prowling around. Schools are empty. The local authorities are collecting less tax and consequently there are no funds for the police and fire brigade. Property prices are falling. Those evicted often have to put up in state homes – the cost of which is borne by the taxpayer. Ancillary industries connected with housing like construction, plumbing, architecture and the like are closing shop resulting in spiraling unemployment. With so many houses tumbling, the mortgage market is feeling an acute credit crunch. The ripples are spilling over from Wall Street to world stock markets. The accusing finger points to the sub-prime mortgage market for this situation.

The House Ways and Means Committee, to help the debt-ridden victims of foreclosures have approved a Bill. Hitherto if the lender forgave or waived a portion of the debt in the event of a sale then the Internal Revenue Services regarded that amount as taxable income. The present bill has placed a three-year freeze on this type of taxation.

The irony is that since the government coffers cannot be allowed to go empty the legislation plans to put a check on tax breaks currently enjoyed by owners of second houses. Till now as per the law such owners took advantage of deductions to the tune of $250,000 for single owners and $50,000 for couples, from the gain when such a unit was sold The owner of the second house could qualify for exclusion if the unit had been lived in it for two years of the five years from the date of purchase. But now the rules have gone all topsy-turvy with it being ruled that the exclusion is to be calculated on how many years the house came to be used as a home and the main residence of the owners. The legislation is stirring up opposition. Republican Sam Johnson from Texas alluded to the tax as a luxury one imposed upon luxury houses.

In the Senate there is a legislation pending which shall provide for a tax break for foreclosure victims but it does not do away or lessen tax benefits for other types of house owners.

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