The Foreclosure Prevention Act of 2008

The actual bill that passed is the Housing and Economic Recovery Act of 2008, HR 3221.

Actual Text:

JCT Explanation of the tax provisions: CCH Briefing should answer your questions:

"Dick Adams" wrote in

There are, or so it is believed, a slew of people "in business" who are operating mainly on e-bay type sites that conduct business through paypal type services. Also, many believe that the reporting mechanisim from the credit card processor (which will catch paypal users) - similar to a 1099 - will increase reporting.

They act as if there are people who would, like, cheat on their taxes by under-reporting their income. Say it isn't so.

For a bulk of taxpayers, it has no direct impact.

For those who conduct an unreported business - or an under-reported business - they are soon going to force the reporting of some of your revenues.

The first two have been answered here.

The exclusion of gains modification is not going to bring in much revenue, but satisfies some lawmakers sense of right and wrong.

As Section 121 read before this change, if you owned and livd in this home as yourmain home for at least two of the five years before sale, you got the $250,000/500,000(MFJ) exclusion of gain.

Someone discovered you could have rental property for umpteen years, then the last two years before sale move in and use it as your main home, and still exclude the 250,000/500,000 except for any post May 5, 1997 depreciation allowed/allowable on the rental.

The modification is to require you to prorate the exclusion for the time used as a rental when you later move into the home as your main home.

So if you used it as a rental for the first three of the five years, and as your main home the last two of the five years, the exclusion amount is now 2/5 x 250,000 = 100,000.

This prorating of the exclusion is one way only. If you lived in it as your main home the first two or three years then converted it to a rental the last three or two years, there is no need to prorate the exclusion.

I think it's the gain that's prorated, not the exclusion. IOW, the full $250,000 exclusion is available if you have that much gain during the period of qualified use.

It's Section 3092 of the bill, HR 3221

You're right.

And it applies to all periods after 2008, not just the five years before sale. So if you used the house as rental property for fifteen years after 2008 and the last two years of ownership you converted to your main home, then 2/17 x (gain) would qualify against the 250,000 or 500,000 exclusion.

As said ealier, there is really very little money to be made by the government here. Just something to add complexity to the tax laws, an element clearly lacking today :-)

Shame on you! Every last one of them is working tirelessly to simplify the Code. Haven't you been paying attention to their campaign rhetoric?

Whenever I hear 'tax simplification'. I reach under my pillow and click off the safety catch on my Luger.

Though obsolete, my Luger is deadly force against politicians standing in my bedroom doorway or more likely on the screen of my television. A least destructive alternative is to give such politicans the little finger of your left hand - better known as "when you don't care enough to send the very best."

Dick

Alas, did take into consideration the non-arm's length sales of rental property?

Dick