Bob should be pleased to see that today’s New York Times editorial on taxing debt forgiven in foreclosure puts the blame squarely on Congress’ shoulders. On Monday, Bob posted about a New York Times news article on the same topic. He argued that the problem was real, but the responsibility lies with Congress, not the I.R.S., on the sensible grounds that Congress has the power to write the rules, whereas the I.R.S. just enforces them. The New York Times editorial page apparently agrees, because today’s piece says that it’s not the I.R.S.’ fault and ends with a call to Congress to provide relief.
I, for one, am going to take this as confirmation that the Times’ editorial board is composed of Credit Slips readers.
Comments
3 responses to “Blaming the Correct Governmental Body”
You deserve a better readership than that.
NOT this reader. I not only think it’s WRONG to provide relief for ANYONE (company or individual) who finds himself on a losing end of this travesty, I think it’s ludicrous to provide tax breaks to those who finance 100% of the home’s purchase price.
(Yes, it’s nonsensical to provide anyone a tax break that encourages housing purchases at the end of a HUGE bubble, but I’m trying to be reasonable.)
Kent Anderson has a post on Bankruptcy Law network dealing with the same tax nightmare that was the subject of the original New York Times article, supporting the same conclusion reached in the editorial – that the fault lay squarely with the lender for reporting an incorrect market value, and not with the IRS.
I don’t read the editorial as proposing congressional intervention to bail out lenders. The most obvious fix is to have a law requiring the accurate reporting of market value and also accurate calculation of the payoff amount, providing meaningful penalties for errors in excess of a certain tolerance level – analogous to TIL. At present lenders gain significant tax advantages to themselves by fudging both amounts. The tax liability to the borrower is an unintended consequence.