[Congressional Record (Bound Edition), Volume 145 (1999), Part 6]
[Extensions of Remarks]
[Page 8692]
[From the U.S. Government Publishing Office, www.gpo.gov]




                MORTGAGE CANCELLATION RELIEF ACT OF 1999

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                         HON. ROBERT E. ANDREWS

                             of new jersey

                    in the house of representatives

                         Wednesday, May 5, 1999

  Mr. ANDREWS Mr. Speaker, economic conditions in my district have 
resulted in decreased home values, and in many situations, homeowners 
find that the value of their home is less than their outstanding 
mortgage. Generally homeowners who are forced to sell their home for 
less than the amount of the outstanding mortgage must find additional 
funds to pay off the lender for the mortgage shortfall. However, in 
some situations, the lender might forgive the shortfall as an 
accommodation to the homeowner.
  For example, a homeowner who has become unemployed might be forced to 
sell because there is no income to make the mortgage payments. If the 
proceeds are insufficient to pay off the mortgage, the lender might 
forgive the shortfall--particularly if there is no possibility of 
recovery from the unemployed homeowner. Although the homeowner has lost 
a home, as well as all equity investment, the income tax laws require 
that unemployed former homeowner pay taxes on the amount of the 
mortgage forgiven by the lender. The tax laws treat this forgiven 
amount as if it had been paid to the former homeowner by the lender. 
So, even though the former homeowner does not have money to maintain or 
pay off the mortgage, the tax laws require this unfortunate person to 
pay tax on the forgiven amount.
  This outcome is patently unfair, particularly when we consider that 
the income tax laws allow better-situated homeowners to exclude up to 
$250,000 ($500,000 for married couple filing jointly) of gain on the 
sale of a home. It seems ironic that under current income tax laws, the 
only two classes of homesellers remaining in the tax system are: 
Taxpayers with capital gains in excess of $250,000/$500,000; and 
Taxpayers whose home values have declined below the outstanding 
mortgage.
  The ``Mortgage Cancellation Relief Act of 1999'' rectifies this 
injustice by exempting taxpayers from including in ordinary income any 
mortgage amount forgiven by a lender, provided the proceeds of the home 
sale are insufficient to satisfy the qualified outstanding mortgage. 
This legislation introduces fairness in the taxation of a home sale, 
extending equity to those (former) homeowners most in need of tax 
relief.

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