S2039 — An Act relative to the relief of mortgage debt

Summary

An Act relative to the relief of mortgage debt

Bill Text

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This bill adds a new provision regarding the treatment of discharged debt from principal residences in Massachusetts law, primarily affecting the gross income exclusion for forgiven mortgage debt.

• Chapter 62, Section 2

  (S) To the extent not otherwise excluded from gross income, in whole or in part, income attributable to the discharge of debt on a principal residence, including debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, subject to the following conditions and limitations: (i) No more than $2,000,000 of forgiven debt is eligible for the exclusion under this section, or $1,000,000 in the case of married filing separately for the purposes of federal taxes. (ii) This section shall only apply to 'acquisition indebtedness' as defined in section 163(h)(3)(B) of the Code. (iii) The amount excluded from gross income by reason of this section shall be applied to reduce, but not below zero, the Massachusetts basis of the principal residence of the taxpayer. (iv) This section shall not apply to the discharge of a loan if the discharge is on account of services performed for the lender or any other factor not directly related to a decline in the value of the residence or to the financial condition of the taxpayer. (v) If any loan is discharged, in whole or in part, and only a portion of such loan qualifies under this section, this section shall apply only to so much of the amount discharged as exceeds the amount of the loan, as determined immediately before such discharge, which does not qualify. The principal residence exclusion shall take precedence over an insolvency exclusion unless elected otherwise. (vi) For the purposes of this section, the term 'principal residence' shall have the same meaning as in section 121 of the Code.

  This addition establishes specific conditions under which forgiven mortgage debt can be excluded from gross income in Massachusetts.

• This act shall apply to discharges of indebtedness on or after January 1, 2013.

  This specifies the effective date for the new provision concerning discharged debt.

• The commissioner shall promulgate regulations to effectuate this provision within 180 days of the effective date of this act.

  This directs the commissioner to create necessary regulations to implement the new law.

Sponsors

• Mark C. Montigny · Primary

Subjects