Shane, a clarification, please!

wealthbuilder2 · Posted: Sat Mar 01, 2008 9:51 pm Post subject: Shane, a clarification, please!

Shane, the law seems to imply that the forgiveness applies only to acquisition debt: Mortgage Forgiveness Debt Relief Act of 2007 - Amends the Internal Revenue Code to exclude from gross income amounts attributable to a discharge, prior to January 1, 2010, of indebtedness incurred to acquire a principal residence. It goes on to say that the maximum amount of the excluded amount is $2 Milliion.

It does seem to indicate the law covers refinances if for "substantial" improvement of the house, which does not seem to cover the new Escalade and the trip, for a month to Jamaica. Is there in fact a "Use of Proceeds" test

Can you clarify?

Thanks!

Bill

helping_user

Welcome Bill.

As much as I know, the debt forgiveness is not meant for mortgages on second homes. It includes primary residences only. There are certain criteria for debt forgiveness under this act. But I haven't yet heard of any Use of proceeds test.

Thanks.

shane · Posted: Mon Mar 03, 2008 8:46 am Post subject:

I haven't heard of a use of proceeds test either. I even called the IRS this morning and asked and the representative there said there isn't a use of proceeds worksheet. On this I'd really consult with your CPA or tax adviser on what qualifies as substantial home improvement since they should be familiar with tax law.

A blog I found that gives a Cliff Notes overview of the law is at "http://www.homesalessandiego.com/blog/mortgage-debt-forgiveness-law/"

[Email address deactivated as per forum rules. Thanks.]

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