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Death to the Phantom Tax!

by Jennifer Kirby on April 21, 2007
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Minneapolis Real Estate Owners in Foreclosure Could be in Luck

Well, it looks like we could be having a funeral very soon. Let’s all cross our fingers and pray for it to die. I’ll be the first to shovel some dirt over the coffin…and let’s make sure we dig a really, really deep hole so it cannot resurrect itself in the future.

What am I talking about? For those of you who have never dealt with a foreclosure or short sale this might be news, but to those of you currently in this unfortunate position, it could be good news. See, when a Minnesota home owner short sales their home and sells if for $150,000 instead of the $200,000 they owe, the bank issues a 1099 to the federal government. The government sees you as actually getting $50,000 in income (the difference between the two numbers) and sends you a tax bill. That’s right. You got stabbed in the gut with a really large knife when you lost your home or had to short sell it, then the government steps in and twists it back and forth just to make sure it hurts a little more.

But now the National Association of Realtors is very close at getting the Federal Government to stop twisting the knife. The House of Representatives has introduced H.R. 1876, the Mortgage Cancellation Tax Relief Act, which will no longer tax individuals when they have had a part of a mortgage loan forgiven or have been forced to foreclose because of their inability to pay their mortgage.

Let’s pray that this bill passes. With the increase of foreclosure and short sales being seen all over the country, it has the potential to affect thousands of home owners by ridding them of one financial burden being replaced by another. Just another way Realtors are looking our for the consumer!

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