Exclusion From Gross Income For Certain Forgiven Mortgage Obligations. H.R. 3648

Mortgage Forgiveness Debt Relief Act

(a) In General- Paragraph (1) of section 108(a) of the Internal Revenue Code of 1986 (relating to exclusion from gross income), is amended by striking `or' at the end of subparagraph (C), by striking the period at the end of subparagraph (D) and inserting `, or', and by inserting after subparagraph (D) the following new subparagraph:
(E) in the case of an individual, the indebtedness discharged is qualified residential indebtedness.'

(b) Qualified Residential Indebtedness Shortfall- Section 108 of such Code (relating to discharge of indebtedness) is amended by adding at the end the following new subsection:

(h) Qualified Residential Indebtedness-
(1) LIMITATIONS- The amount excluded under subparagraph (E) of subsection (a)(1) with respect to any qualified residential indebtedness shall not exceed the excess (if any) of--
(A) the outstanding principal amount of such indebtedness (immediately before the discharge), over
(B) the sum of--
(i) the amount realized from the sale of the real property securing such indebtedness reduced by the cost of such sale, plus
(ii) the outstanding principal amount of any other indebtedness secured by such property.

QUALIFIED RESIDENTIAL INDEBTEDNESS

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