11.22.09
Posted in Business Law at 19:11 by Administrator
Anyone starting a new business has a multitude of issues to consider. The following is an overview of some the important legal and tax issues:
1. A type of business entity must be selected. The type of entity will dictate, among other things, which tax form(s) will need to be filed. The most common types of business entities are the sole proprietorship, partnership, limited liability company, and corporation.
2. Business and, if necessary, other licenses must be obtained.
3. The type of business you operate will determine what taxes you must pay and how you pay them. The four general types of business taxes are income tax, self-employment tax, payroll tax and sales/excise tax.
4. An Employer Identification Number is used to identify a business entity. All businesses, except sole proprietorships, need an EIN.
5. Good record keeping is absolutely essential. Generally, you may choose any record keeping system which is suited to your business and which clearly shows your income and expenses. Except in a few cases, the law does not require any special kind of records. However, the type of business you operate will affect the type of records you need to keep for tax purposes.
6. Every business must calculate its taxable income on an annual accounting period called a tax year. The calendar year and the fiscal year are the most common.
7. Each business must also use a consistent accounting method, which is a set of rules for determining when to report income and expenses. The most commonly used accounting methods are the cash method and the accrual method. Under the cash method, you generally report income in the tax year you receive it and deduct expenses in the tax year you pay them. Under an accrual method, you generally report income in the tax year you earn it and deduct expenses in the tax year you incur them.
Earle Law Offices is available to assist you with every legal and tax aspect of your small business, including entity selection and formation, accounting and tax issues, employee and personnel issues, risk management, and litigation. Please call our office today for assistance with your legal and tax issues.
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Posted in Real Estate Law at 19:05 by Administrator
The current downturn in the real estate market has resulted in many California homeowners being in danger of losing their homes through foreclosure. The California Home Equity Sales Contract Purchase Act (HESCPA), California Civil Code § 1695 et. seq., seeks to protect homeowners from overreaching by real estate investors, through the imposition of certain non-waivable requirements relating to both the form and substance of most contracts for the purchase of California homes in foreclosure. Criminal and civil penalties can result from violations of HESCPA.
Criminal penalties can include a $10,000 fine and one year in jail for each violation; civil penalties can include an award of actual and punitive damages, and attorney fees. Penalties under HESCPA can be imposed in addition to any other remedies which may be provided for by other provisions of law. The statute of limitation for HESCPA violations is four years.
A recent case, Spencer v. Marshall, 168 C.A.4th 783 (2008), is instructive. During 1998, Alanna Spencer, a first-time home buyer, purchased a condominium in Hayward, California. Several years later, the lender, Option One Mortgage, filed a Notice of Default (NOD). At the time the NOD was filed, the condominium appraised for $290,000, some $120,000 more than Spencer then owed on it.
Ryan Marshall “or assigns” purchased the condominium from Spencer for $200,000 – $30,000 more than Spencer owed on the property, but $90,000 less than the property’s appraised value. The purchase agreement was reviewed by Spencer’s attorney and Spencer understood that the sale price for the condominium was less than its appraised value.
After the sale, Spencer filed a lawsuit against Marshall, seeking to rescind the deed which transferred title of the condominium from Spencer to Marshall, to quite title to the condominium, and for compensatory and punitive damages. After a bench trial on Spencer’s HESCPA claims, the trial court entered judgment against Marshall, awarding Spencer $70,000 in actual damages and $210,00 in punitive damages, for a total award of $280,000.
Another California statute seeks to protect homeowners in foreclosure by regulating the activities of “foreclosure consultants”. A foreclosure consultant is defined as any person (with certain limited exceptions) who solicits, represents or offers to a homeowner the performance of a service for compensation which effectively will save a homeowner from foreclosure, or assists a homeowner in obtaining the remaining proceeds from a foreclosure sale (“surplus funds”). Civil Code § 2945.1.
The foreclosure consultant statute may be enforced either criminally or civilly. Criminal penalties may include a fine of up to $10,000 and/or one year in jail for each violation. C.C. § 2945.7. Civil lawsuits may result in a judgment awarding actual and/or punitive damages, injunctive relief, and attorney fees. The statute of limitation is four years from the date of the alleged violation. C.C. § 2956.6(b). Damage awards, like remedies under the HESCPA, do not preempt rights and remedies an aggrieved homeowner may have under other provisions of law. C.C. § 2945.6(b).
Please contact Earle Law Offices today if you invest in California foreclosure properties or if you believe California law may have been violated with respect to a foreclosure property you own or owned.
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Posted in Litigation, Taxation Law at 17:45 by Administrator
“ “ ‘[A] party who chooses to litigate an issue against the Government is not only representing his or her own vested interest, but is also refining and formulating public policy.’ ” INS v. Jean, 496 U.S. 154, 165 n. 14 (quoting H.R. Rep. No. 96-1418, at 10 (1980). For this reason, our legal system has adapted to ensure that, in certain circumstances, every citizen is able to defend himself against unjustified government action, free from the financial disincentives associated with litigation. [26 U.S.C. § 7430] provides such assurance to taxpayers.” Morrison v. Commissioner of Internal Revenue, 2009 WL 1312855 (C.A.9).
“The U.S. Tax Code permits a discretionary award of litigation costs, including attorneys’ fees, to the prevailing party in any civil tax proceeding brought by or against the United States. 26 U.S .C. § 7430(a). A ‘prevailing party’ is a party that ‘has substantially prevailed with respect to the amount in controversy’ or ‘with respect to the most significant issue or set of issues presented.’ § 7430(c)(4)(A)(i).” Id.
Section 7430 reads, in relevant part: “In any administrative or court proceeding which is brought by or against the United States in connection with the determination, collection, or refund of any tax, interest, or penalty under this title, the prevailing party may be awarded a judgment or a settlement for . . . reasonable litigation costs incurred in connection with such court proceeding.”
The issue in Morrison was whether a taxpayer may recover attorney fees after successfully challenging an IRS audit where a third party, instead of the taxpayer, advanced the taxpayer’s attorney fees to litigate against the IRS.
The fee controversy in Morrison arose after Morrison, a shareholder and officer in Caspian, a corporation, sold his interest in Caspian to Nariman Teymourian, another Caspian shareholder. Before Morrison resigned as an officer of Caspian, the IRS initiated audits of Morrison, Caspian, and Teymourian.
The IRS issued Notices of Deficiency to Morrison, Caspian and Teymourian. Morrison and Caspian each petitioned the United States Tax Court for redetermination; their tax court cases were consolidated and both parties retained the same law firm to represent them. After Morrison and Caspian both prevailed on their Tax Court petitions, both filed section 7430 motions seeking an award of attorney fees.
The Tax Court denied Morrison’s fee request on the ground that Morrison had not actually paid or “incurred” such fees, as Caspian had advanced Morrison’s fees under an agreement requiring Morrison to reimburse Caspian in the event Morrison was successful in obtaining a fee order against the IRS.
The IRS argued that Morrison had not “incurred” any attorney fees within the meaning of section 7430, arguing that a contrary interpretation of the term “incurred” would give rise to the so-called “stand-in” litigant problem. A stand-in litigant is one who seeks an award of attorney fees and then passes those fees on to an ineligible litigant.
Morrison, on the other hand, argued that the problems associated with a stand-in litigant, although perhaps a justified concern in the context of fee motions under other statutes, are not present in section 7430 cases because, unlike other cases litigated against the Government, it is the IRS who, at least in the first instance, initiates tax cases through audit and Notice of Deficiency. Additionally, Morrison argued, denying fee motions in tax cases where a third party paid the taxpayer’s attorney fees would provide the government with an incentive to deny meritorious claims, thereby requiring a taxpayer to litigate. Thus, the government could act unreasonably not only in its initial administrative proceedings, but also during litigation of the appeal, confident in the knowledge that it will not be ordered to pay the taxpayer’s attorney fees.
On appeal, the Ninth Circuit Court of Appeals found Morrison’s argument more consistent with legislative intent than the position advanced by the IRS, and held that a taxpayer can “incur” attorneys fees if the taxpayer assumes either: (1) a noncontingent obligation to repay the fees advanced on his behalf at some later time; or (2) a contingent obligation to repay the fees in the event of their eventual recovery. Id., at 3.
Because the Tax Court took the view that a litigant can never “incur” fees if the fees are first paid by a third party, the Tax Court did not reach the issue of whether the agreement between Caspian and Morrison would support an award of attorney fees in this case. Accordingly, the Ninth Circuit remanded the case to the Tax Court for further proceedings.
Please contact Earle Law Offices immediately to obtain ethical, aggressive tax controversy representation if you become the target of an IRS examination. Depending on the facts of your case, it may be possible to use section 7430 to obtain a fee award against the IRS. If Earle Law Offices prepared the return which is being audited, your attorney fees for tax controversy representation were included in the fee for the preparation of your return.
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Posted in Real Estate Law at 17:42 by Administrator
Tax Credit Can Be Used for Down Payment: As part of its plan to stimulate the U.S. housing market and address the economic challenges facing our nation, Congress has passed legislation that grants a tax credit of up to $8,000 to first-time home buyers.
Who Qualifies?: First-time home buyers who purchase homes between January 1, 2009 and December 1, 2009. To qualify as a “first-time home buyer” the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase.
Which Properties Are Eligible?: The 2009 First-Time Home Buyer Tax Credit may be applied to primary residences, including: single-family homes, condos, townhomes, and co-ops.
How Much Will the Credit Be?: The maximum allowable credit for home buyers is $8,000. Each home buyer’s tax credit is determined by two factors:
1. The price of the home—the credit is equal to 10% of the purchase price of the home, up to $8,000.
2. The buyer’s income—single buyers with incomes up to $75,000 and married couples with incomes up to $150,000—may receive the maximum tax credit.
If the Buyer(s)’ Income Exceeds These Limits, Can He/She Still Get a Credit?: Yes. Some buyers may still be eligible for the credit. The credit decreases for buyers who earn between $75,000 and $95,000 for single buyers and between $150,000 and $170,000 for home buyers filing jointly. The amount of the tax credit decreases as his/her income approaches the maximum limit. Home buyers earning more than the maximum qualifying income—over $95,000 for singles and over $170,000 for couples are not eligible for the credit.
Will the Tax Credit Need to Be Repaid?: No. The buyer does not need to repay the tax credit, if he/she occupies the home for three years or more. However, if the property is sold during the three-year period, the credit will be recouped on the sale. Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, said recently that the Federal Housing Administration is going to permit its lenders to allow home buyers to use the $8,000 tax credit as a down payment. Previously, most buyers wouldn’t receive the funds until after they filed their tax return, and that deterred some people from using the credit. “We all want to enable FHA consumers to access the home buyer tax credit funds when they close on their home loans so that the cash can be used as a down payment,” said Donovan. His remarks came in an address to several thousand REALTORS®, at “The Real Estate Summit: Advancing the U.S. Economy,” at the 2009 REALTORS® Midyear Legislative Meetings & Trade Expo in Washington, D.C. Donovan said FHA approved lenders will be permitted to “monetize” the tax credit through short-term bridge loans. This will allow eligible home buyers to access the funds immediately at the closing table.
Watch for Legal Pitfalls When Working with Distressed Properties: Short sales and bank-owned properties can present fantastic opportunities for potential home owners, real estate investors, and REALTORS®. However, transactions in such properties can be the legal cause of harm to buyers and sellers, as well as result in civil liability for REALTORS®.
Be Wary Real Estate “Professionals” Who Call Themselves an “Expert.”: Almost overnight, companies have sprung up offering the opportunity to become “certified” as a specialist in short sales or REOs. Although some of the programs might provide good training, REALTORS® can invite trouble if they go overboard and market themselves as an expert.
Read the Fine Print: Some certification companies have an indemnification clause that puts legal costs on the REALTORS’® shoulder if the certification company is included in any lawsuit against the REALTORS®. Read the disclaimers.
Don’t Engage in the Unauthorized Practice of Law: Other increasingly common practices, such as broker price opinions, negotiations with lenders in short sales, and giving advice to homeowners about seeking a loan modification before they try a short sale, are all practices that might be challenged as either unauthorized practice of law or otherwise outside the scope of activities authorized by a real estate license.
Check Your E&O Coverage: If you help homeowners navigate a loan modification, be aware that your E&O policy might not cover your actions if you’re sued. Similarly, if you handle REOs for a lender, be sure your E&O policy covers property management activity. Many tasks related to selling REO properties are property management functions: getting utilities turned on, keeping the property secure if it’s vacant, even evicting people.
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Posted in Trusts and Estates at 17:38 by Administrator
When establishing an estate plan, you likely will be faced with decisions on how to provide for your children’s potential future inheritance. Life insurance, among other things, might be a vehicle for providing your children (or others) with an inheritance.
You also might want to consider including provision in your estate plan which controls until a certain age, perhaps age 25, distributions to children. A living trust will allow you to tailor provisions for distribution to achieve results appropriate for your specific goals and objectives. Generally, estate plan drafting considerations depend on the age of your children, the amount of money involved, and your level of concern. Following are three options for your consideration:
1. Distribution outright and free of trust for beneficiaries 18 years of age or older;
2. Distribution to a trust established for a child, with specific provisions for distributions and trust termination; or
3. Distribution to a trust for the life of the child.
For example, if the children are over 30 and have no tax, civil liability, health, or marital property issues, you may prefer an immediate, outright distribution, combined with the establishment of trusts for grandchildren.
These, and other, issues should be discussed with your attorney when you and your attorney formulate your estate plan.
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Posted in Trusts and Estates at 17:36 by Administrator
The Trust Administration process following the death of the settlor or, in the case of a married couple, the death of the last settlor, consists, usually, of four (4) phases: Intake, Transfer of Trustee Duties to Successor Trustee(s), Marshaling of Assets, and, finally, Trust Termination.
Intake: The intake phase generally consists of: (i) a review of the dispositive provisions of the Trust; (ii) a conversation about the family members, whether anyone has been disinherited or if there will be any other potential problems with family members; (iii) discussion of any potential problems immediately known; (iv) discussion of the roles of the successor trustee(s); and (v) discussion of the scope of work by the attorney and signing an engagement agreement.
Transfer of Trustee Duties to Successor Trustee(s): Once a successor trustee(s) is in place, an Affidavit of Death will be prepared, signed and recorded with the appropriate county recorder in counties where the Trust owns real property. An affidavit of Death clears title to real property so the sucessor trustee can manage the property. A Trust Notification will also be served in accordance with California Probate Code § 16061.7 (to initiate the period during which claims against, and contests to, the Trust may timely be initiated). A certification of trust will also be prepared to assist the successor trustee with the marshaling other assets, such as bank accounts. A federal tax identification number will also be obtained, if needed.
If there are assets which were not placed into the trust prior to the death of the settlor(s), it may be necessary to invoke other legal procedures, such as a Probate Code § 13100 Affidavit, Probate, or Heggstad Petition.
Marshaling of Assets: All of the settlor(s)’ assets must be identified and valued. Federal estate tax returns must be filed within nine (9) months of the date of death. If there are small cash gifts to be made in accordance with the Trust, preliminary distributions can be made.
Trust Termination: Finally, after all assets are identified, marshaled and valued, and all tax returns have been filed (for the decedent, for the estate, for the trust and federal estate tax returns) then it is likely that all trust assets can be distributed and the trust terminated. A trust distribution agreement will be prepared and sent to the beneficiaries for review and signatures. After all beneficiaries have agreed to the proposed asset distribution, and the assets have been distributed, it may be necessary to prepare and file a final fiduciary tax return on behalf of the Trust. Trust administration is almost always easier and less expensive than probate, as court oversight and approval of trust administration usually is not necessary. However, trust administration is something that is best done with the assistance and advice of counsel.
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Posted in Family Law, Litigation at 17:34 by Administrator
There is no statute of limitations for the enforcement of California child support orders. Such orders are “per se enforceable until paid in full, and . . . not retroactively modifiable either as to accrued arrearages or any interest due thereon.” In re: Marriage of Hamer, 810 C.A.4th 712, 718, superceded by statute on other grounds. As a result, claims that court-ordered child support was never paid often arise many years after – sometimes even after the child for whom support was ordered has reached age 18 – the payments came due. Not only is there no statute of limitations for enforcing child support orders, the payor of child support bears the burden of proving payments were made, in the event a payee later claims support payments were not made.
Claims of unpaid past child support often total tens of thousands, if not $100,000 or more, plus interest.
Willful failure to pay court-ordered child support can also constitute contempt of court. Contempt is punishable by, among other things, a period of confinement in a local jail. Contempt is not always a preferred remedy, however, because often the payee may not want to impair the payor’s ability to earn funds which will be used to make support payments. Unlike child support orders, which are “per se enforceable until paid in full”, there is a statute of limitations which applies to contempt actions. Thus, even though a contempt action may be time-barred, it may still be possible to bring an action to collect unpaid child support.
There is an equitable (as opposed to statutory) limitation – known as the doctrine of latches – which may, in certain cases, limit the “per se enforceable until paid in full” character of child support orders. For a latches defense to succeed, the payor must prove that the payee unreasonably delayed in bringing an action to enforce a child support order and that the payor was prejudiced by that delay. California appellate courts have held that delay alone – even many years of delay – without a showing of prejudice, is insufficient for a latches defense to succeed.
The defense of latches, although still available in limited class of cases, was significantly restricted by a 2003 amendment to California law which provides that the defense is available only in cases in which the Department of Child Support Services (DCSS) is responsible for the enforcement of child support orders. DCSS is not responsible for the enforcement of most child support orders; consequently, a latches defense will not be available in most cases. If you have been ordered to pay child support:
1. Keep a record of each child support payment. Detailed and accurate records which prove payments were made and received will be essential to the successful defense of an action to collect past child support. Such actions often are brought many years after the due date of the payment (10 years to 20 years is not unheard of), sometimes even after the child has turned 18. Thus, the importance of keeping accurate records cannot be understated: Imagine looking forward to retirement in the near future, even after the recent decline in the stock market and retirement account holdings in publically traded stocks, only to be served with an action for past-due child support, totaling tens of thousands if not $100,000 or more, in child support.
2. Make child support payments by wage assignment. Child support payees are entitled, by law, to a wage assignment order, which is an order that requires the payor’s employer to deduct courtordered child support from the payor’s paycheck and forward payment directly to the payee.
3. Do not “off-set” (reduce) child support payments against debts owed by the child support payee. It is not uncommon for the person to whom child support is owed to also owe the child support payor money for any number of debts or other obligations. For example, a child support payee may owe the support payor money related to a property division settlement in a divorce case, or a support payee may owe the support payor rent for a residence the payee rents from the payor. The fact that a support payee owes the support payor a debt is not a defense to non-payment of child support. Accordingly, support payors should resist the temptation to reduce child support payments to the child support payee by the amount the support payee owes the support payor, or by any amount.
4. Child support payors should consider asking the DCSS to assume responsibility for collecting child support payments. Typically, it is the support payee who seeks the assistance of DCSS. However, there is no logical reason why payors should not also take advantage of this government service which is being funded by taxpayers.
5. Immediately upon termination of a child support obligation, promptly obtain a judicial determination that all child support payments have been made. Once a child support obligation terminates, the payor of support usually is content simply to discontinue making support payments. This course of action leaves the door open for the payee to, many years down the road, attempt collection of accrued, but allegedly unpaid, support payments. To close the door to this possibility, hire an attorney to obtain a judicial determination that no support arrears are owed; the cost of doing so will be substantially less than the cost of proving, perhaps years later, that all support payments have been made.
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Posted in Litigation, Taxation Law at 17:32 by Administrator
The IRS has an appeals system for people who do not agree with the results of an examination (audit) of their tax returns or with other adjustments to their tax liability. Here are the top five things to know when it comes to your IRS appeal rights.
1. When the IRS makes an adjustment to your tax return, they will send you a report or a letter explaining the proposed adjustments. This letter will alert you of your right to request a conference with an Appeals office and how to put in a request for such a conference.
2. In addition to examinations, many other things can be appealed. You can also appeal penalties, interest, trust fund recovery penalties, offers in compromise, liens and levies.
3. If you request an Appeals conference, be prepared with records and documentation to support your position.
4. Appeals conferences are informal meetings. You may represent yourself or have someone else represent you. Those allowed to represent taxpayers include attorneys, accountants or individual enrolled to practice before the IRS.
5. If you do not reach agreement with IRS Appeals or if you do not wish to appeal within the IRS, you may appeal certain actions through the courts.
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Posted in Taxation Law at 17:29 by Administrator
The Internal Revenue Service announced on Thursday, March 5, 2009, that it will not renew contracts, which expire Friday, with two private debt collection agencies.
“After a thorough review of this program, I have decided not to renew the contracts,” IRS Commissioner Doug Shulman said. “I believe this work is best done by IRS employees, and I believe we have strong support from the Administration and the Congress for increased IRS enforcement resources going forward.”
Shulman also noted that the IRS anticipates hiring over 1,000 new collection personnel in FY 2009. These new employees would give the IRS the flexibility to make assignments based on the areas of greatest need rather than filtering which cases can be worked using contractor resources.
Shulman cited the results of a cost-effectiveness study of the private debt collection program.
The study – supported by an independent review – showed that it is reasonable to conclude that when working similar inventory, IRS collection is more cost effective than the contractors.
IRS employees have a range of options available to them in attempting to resolve difficult collection cases that, by law, the private contractors do not have.
Translation: The IRS has what it takes to take what you have; the IRS, supported by the Obama Administration, intends to use the full coercive powers of the Federal Government to collect taxes more effectively and efficiently than private collection agencies, which cannot use all the oppressive collection techniques which are available to the government.
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Posted in Real Estate Law at 17:26 by Administrator
If you owe a debt to someone else and they cancel or forgive that debt, the canceled amount may be taxable.
The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.
This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.
The following are some of the most commonly asked questions and answers about The Mortgage Forgiveness Debt Relief Act and debt cancellation:
What is Cancellation of Debt?
If you borrow money from a commercial lender and the lender later cancels or forgives the debt, you may have to include the cancelled amount in income for tax purposes, depending on the circumstances. When you borrowed the money you were not required to include the loan proceeds in income because you had an obligation to repay the lender. When that obligation is subsequently forgiven, the amount you received as loan proceeds is normally reportable as income because you no longer have an obligation to repay the lender. The lender is usually required to report the amount of the canceled debt to you and the IRS on a Form 1099-C, Cancellation of Debt.
Is Cancellation of Debt Income Always Taxable? Not always. There are some exceptions. The most common situations when cancellation of debt income is not taxable involve:
* Qualified principal residence indebtedness: This is the exception created by the Mortgage Debt Relief Act of 2007 and applies to most homeowners.
* Bankruptcy: Debts discharged through bankruptcy are not considered taxable income.
* Insolvency: If you are insolvent when the debt is cancelled, some or all of the cancelled debt may not be taxable to you. You are insolvent when your total debts are more than the fair market value of your total assets.
* Certain farm debts: If you incurred the debt directly in operation of a farm, more than half your income from the prior three years was from farming, and the loan was owed to a person or agency regularly engaged in lending, your cancelled debt is generally not considered taxable income.
* Non-recourse loans: A non-recourse loan is a loan for which the lender’s only remedy in case of default is to repossess the property being financed or used as collateral. That is, the lender cannot pursue you personally in case of default. Forgiveness of a non-recourse loan resulting from a foreclosure does not result in cancellation of debt income. However, it may result in other tax consequences.
The Mortgage Forgiveness Debt Relief Act of 2007: The Mortgage Forgiveness Debt Relief Act of 2007 was enacted on December 20, 2007. Generally, the Act allows exclusion of income realized as a result of modification of the terms of the mortgage, or foreclosure on your principal residence.
What Does Exclusion of Income Mean? Normally, debt that is forgiven or cancelled by a lender must be included as income on your tax return and is taxable. But the Mortgage Forgiveness Debt Relief Act allows you to exclude certain cancelled debt on your principal residence from income. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.
Applicability of the Act: The Act applies only to forgiven or cancelled debt used to buy, build or substantially improve your principal residence, or to refinance debt incurred for those purposes. In addition, the debt must be secured by the home. This is known as qualified principal residence indebtedness. The maximum amount you can treat as qualified principal residence indebtedness is $2 million or $1 million if married filing separately.
Debt used to refinance your home qualifies for this exclusion, but only to the extent that the principal balance of the old mortgage, immediately before the refinancing, would have qualified.
“Sunset” Provision: The Act applies to qualified principal residence indebtedness forgiven in calendar years 2007 through 2012.
Second Homes, Credit Cards, Car Loans: Only cancelled debt used to buy, build or improve your principal residence or refinance debt incurred for those purposes qualifies for this exclusion.
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