Mortgage Forgiveness Debt Relief Act of 2007 (MFDR)
The Mortgage Forgiveness Debt Relief Act of 2007 (MFDR) provides some relief for those impacted by the sub-prime mortgage fiasco. MFDR provides some relief to the tax payer when the lender forgives part of a mortgage. For example: In the past, when a lender foreclosed on a home, sold it for less than the outstanding amount of the mortgage, and forgave all or part of the remaining debt, this was counted a income to the borrower. Now with the new law, this particular relief for 2007-2009 borrowers may exclude from income such debt relief. The income exclusion also applies where the lender offers to accept lower monthly payments rather than foreclose on the home.
Eligibility Requirements for the Income Exclusion:
1. The debt must be on a principal residence that secures the loan. Discharge of debt related to a vacation home or investment property does not qualify.
2. The debt must relate to acquisition indebtedness. The loan must have been used to buy, build or substantially improve the home. (Loans to pay education, credit cards, etc. does not qualify for the exclusion.)
3. Exclusion limit is $2 million.
If the income exclusion is claimed, the basis of the residence must be reduced by the amount excluded. Work with your CPA. A good vendor is as valuable as a good customer.
This change is retroactive to 2007 and carries through to 2009.
Effective 2008, this law also provides other important tax breaks for widows and widowers. Please call our office if this information is needed.
Mineral Royalty Investment Alternatives
Increasingly, 1031 exchange investors are turning to Energy Exchange Properties––producing oil and gas assets––as an alternative to more traditional real estate options. Exchanging into mineral royalties (oil or gas producing properties) allows an investor to defer taxes while providing the opportunity for portfolio diversification through exposure to the energy sector. You may use a checklist to evaluate your decision. Legal opinion letter provided upon request.
Preferred Partner: King Royalty www.kingroyalty.com
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