Text: H.R.4826 — 111th Congress (2009-2010)All Information (Except Text)

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Introduced in House (03/11/2010)


111th CONGRESS
2d Session
H. R. 4826


To promote neighborhood stabilization by incentivizing short sales, as a preferable alternative to foreclosure, through the Internal Revenue Code of 1986.


IN THE HOUSE OF REPRESENTATIVES

March 11, 2010

Mr. Foster introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committee on Financial Services, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned


A BILL

To promote neighborhood stabilization by incentivizing short sales, as a preferable alternative to foreclosure, through the Internal Revenue Code of 1986.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. Short title.

This Act may be cited as the “Responsible Homeowner Relief Act of 2010”.

SEC. 2. Deduction for loss from sale of principal residence.

(a) In general.—Part VII of subchapter B of chapter I of the Internal Revenue Code of 1986 (relating to additional itemized deductions for individuals) is amended by redesignating section 224 as section 225 and by inserting after section 223 the following new section:

“SEC. 224. Loss from sale of principal residence.

“(a) Allowance of Deduction.—In the case of an individual, there shall be allowed as a deduction for the taxable year any loss recognized on the sale or exchange of property during the taxable year if, during the 5-year period ending on the date of the sale or exchange, such property has been owned and used by the taxpayer as the taxpayer’s principal residence for periods aggregating 2 years or more.

“(b) Limitations.—

“(1) AGGREGATE LIMITATION.—The aggregate amount allowed as a deduction under subsection (a) for all taxable years shall not exceed $9,000.

“(2) ANNUAL LIMITATION.—

“(A) IN GENERAL.—The amount allowed to a taxpayer as a deduction under subsection (a) for a taxable year shall not exceed $3,000.

“(B) CARRYFORWARD.—If the deduction allowable under subsection (a) for any taxable year exceeds the limitation imposed by subparagraph (A) for the taxable year, the excess shall be carried to each of the 2 succeeding taxable years and added to the deduction allowable under subsection (a) for such succeeding year.

“(3) EXCLUSION OF LOSS ALLOCATED TO NONQUALIFIED USE.—

“(A) IN GENERAL.—Subsection (a) shall not apply to so much of the loss from the sale or exchange of property as is allocated to periods of nonqualified use.

“(B) ALLOCATION.—For purposes of subparagraph (A), loss shall be allocated to periods of nonqualified use based on the ratio which—

“(i) the aggregate periods of nonqualified use during the period such property was owned by the taxpayer, bears to

“(ii) the period such property was owned by the taxpayer.

“(C) PERIOD OF NONQUALIFIED USE; COORDINATION WITH RECOGNITION OF GAIN ATTRIBUTABLE TO DEPRECIATION.—For purposes of this paragraph, rules similar to the rules of subparagraphs (C) and (D) of section 121(b)(5) shall apply.

“(4) APPLICATION TO ONLY 1 SALE.—

“(A) IN GENERAL.—Subsection (a) shall not apply to more than 1 sale or exchange of a principal residence by the taxpayer.

“(B) SPECIAL RULE FOR JOINT RETURNS.—In the case of a joint return with respect to the sale or exchange of a principal residence, if a deduction was allowable under subsection (a) to a spouse for a prior sale or exchange of a principal residence, paragraphs (1) and (2)(A) shall be applied by reducing the dollar amounts therein by the deduction so allowable (one-half of such deduction in the case of a joint return).

“(5) SALE OR EXCHANGE WITH RELATED PERSON.—

“(A) IN GENERAL.—Subsection (a) shall not apply to any sale or exchange to a related person.

“(B) RELATED PERSON.—For purposes of this subparagraph (A), a person (hereinafter in this subparagraph referred to as the ‘related person’) is related to any person if—

“(i) the related person bears a relationship to such person specified in section 267(b) or section 707(b)(1), or

“(ii) the related person and such person are engaged in trades or business under common control (within the meaning of subsections (a) and (b) of section 52).

For purposes of clause (i), in applying section 267(b) or 707(b)(1), ‘10 percent’ shall be substituted for ‘50 percent’.

“(c) Home sales price must be consistent with local market.—The sale or exchange of a principal residence shall not be taken into account for purposes of subsection (a) unless the taxpayer demonstrates to the satisfaction of the Secretary that the price for which such home is sold (or value received in the case of an exchange) is consistent with local property values of dwellings of a similar size and condition at the time of such sale or exchange.

“(d) Applicable rules.—For purposes of this section, rules similar to the rules of subsection (d) of section 121 shall apply, except that paragraph (6) thereof shall be applied by substituting ‘loss’ for ‘gain’.

“(e) Election To have section not apply.—This section shall not apply to any sale or exchange with respect to which the taxpayer elects not to have this section apply.

“(f) Termination.—The section shall not apply to the sale or exchange of a principal residence after December 31, 2012.”.

(b) Deduction allowed in computing adjusted gross income.—Subsection (a) of section 62 of such Code is amended by inserting before the last sentence the following new paragraph:

“(22) LOSS FROM SALE OF PRINCIPAL RESIDENCE.—The deduction allowed by section 224.”.

(c) Conforming amendments.—

(1) Section 165(c) of such Code is amended by striking “and” at the end of paragraph (2), by striking the period at the end of paragraph (3) and inserting “; and”, and by inserting after paragraph (3) the following new paragraph:

“(4) to the extent provided in section 224, losses from the sale or exchange of a principal residence.”.

(2) Section 165(f) of such Code is amended by inserting “and in section 224 in the case of losses from the sale or exchange of a principal residence” before the period at the end.

(d) Clerical amendment.—The table of sections for part VII of subchapter B of chapter 1 of such Code is amended by striking the item relating to section 224 and inserting the following:


“Sec. 224. Loss from sale of principal residence.”.

(e) Effective Date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2008.

SEC. 3. Waiver of Fannie Mae and Freddie Mac waiting period requirements after short sale for certain mortgagors.

(a) In general.—The Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation shall waive the applicability of any short sale waiting period requirement with respect to the purchase and any commitment to purchase, by such Association or Corporation, of a covered mortgage if the mortgagor under such covered mortgage—

(1) was, at the time of the short sale of the principal dwelling of such mortgagor that was subject to the previous mortgage, current on all payments due under the mortgage satisfied by such short sale; and

(2) has a credit score greater than the equivalent of a FICO score of 679.

(b) Definitions.—For purposes of this section, the following definitions shall apply:

(1) COVERED MORTGAGE.—The term “covered mortgage” means a mortgage under which the mortgagor is an individual who was previously the mortgagor under another mortgage on the principal dwelling of such mortgagor, which principal dwelling was sold in a short sale.

(2) SHORT SALE.—The term “short sale”, with respect to an individual, has the meaning given such term under section 605(a)(7)(B) of the Fair Credit Reporting Act.

(3) SHORT SALE WAITING PERIOD REQUIREMENT.—The term “short sale waiting period requirement” means any underwriting or other requirement of the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation that requires, for the purchase by such Association or Corporation of a mortgage under which the mortgagor is an individual who was previously the mortgagor under another mortgage that was sold in a short sale, that any minimum period of time elapse after the occurrence of such short sale.

(c) Sunset.—The provisions of this section shall cease to be effective on and after January 1, 2013.