Congress has passed an amended version of the Mortgage Forgiveness Debt Relief Act :
The bill will enable foreclosed homeowners to avoid owing federal income taxes on any debt that was forgiven when their home was seized and sold this year -- if President Bush signs it into law. Congress was expected to recess later Tuesday or today. The Senate unanimously approved the bill Friday.
"By eliminating the foreclosure tax, we can eliminate one more concern faced by families already struggling to keep a roof over their heads," said Rep. Shelley Berkley, D-Nev., a member of the Ways and Means Committee, where the bill originated.
"By forgiving this tax liability, we will be helping those Americans who are suffering the most as a result of the downturn in the housing market and higher loan costs," Berkley said in a statement.
Dennis Meservy, a certified public accountant and board member of the Nevada Society of Certified Public Accountants, had predicted a "nightmare" if the law had not been changed. The bill appears to be "a great fix," Meservy said. "That's great. That will help."
It is a particularly important piece of legislation for Nevada, which leads the nation in foreclosures. At the end of the third quarter, 2.15 percent of home mortgages in Nevada were in foreclosure, according to the Mortgage Bankers Association. The percentage of loans for which foreclosure started during the quarter climbed to 1.15 percent.
The new legislation will head off further problems for Americans who have been forced into foreclosure and had their credit rating damaged. The Internal Revenue Service can tax borrowers when lenders forgive some of their debt.
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