Debt Relief Act of 2007

MORTGAGE FORGIVENESS DEBT RELIEF ACT OF 2007


1. MORTGAGE DEBT RELIEF
Under the Mortgage Relief Act, effective for indebtedness discharged on or after
January 1, 2007 and extended through the end of 2012 by the Emergency Economic Stabilization Act, taxpayers may generally exclude from
income up to $2 million of mortgage debt forgiveness on their principal residence
from "acquisition indebtedness". This does not include vacation homes or equity
indebtedness on a principal residence. If the acquisition indebtedness has been
refinanced and the new loan has been forgiven,this exclusion applies only to the
acquisition indebtedness.

Any discharge that is not taxable under this provision reduces the taxpayer's basis
in the principal residence, but not below zero. Hence, the taxpayer will have a smaller
basis for the future which also means a larger gain upon the sale of the residence.

2. MORTGAGE INSURANCE PREMIUMS
The one year limit to deduct mortgage insurance premiums (2007) has been extended
and now covers the years 2007-2010.

3. COOPERATIVE HOUSING CORPORATION
The definition of a cooperative housing corporation has been changed. This may make
it easier for owners to be able to claim itemized deductions for real estate taxes on the
cooperative property. Effective for years ending after December 20, 2007.

4. VOLUNTEER FIREFIGHTERS AND EMERGENCY MEDICAL RESPONDERS
Any amounts received under any qualified State and local tax benefit, and any qualified 
payment does not have to be included in the income of the volunteer firefighter or
emergency medical responder's income.

The "qualified State and local tax benefit" is any reduction or rebate of a tax provided
by a State or political division on account of services performed as a member of these 
organizations. The "qualified payment" (or reimbursement)  provided by the State
or political division on account of the performance of services as a member of these
organizations, but not to exceed $30 per month. Any expenses relating to their activities
are reduced by the excluded income, with any remaining amount allowed as a
charitable contribution deduction.

This provision is effective with taxable years beginning after December 31, 2007
and before January 1, 2011. 2008-2011 for calendar year taxpayers.

5. SALE OF RESIDENCE EXCLUSION FOR SURVIVING SPOUSE.
The maximum amount of sale of residence exclusion for a surviving
spouse is $500,000 instead of $250,000 if the sale is not later than 2
years after the date of death of the deceased spouse.Either spouse
has to have owned the property for at least 2 out of the most recent 5
years immediately before the death, AND both spouses have to have
used the property as their principal residence for at least 2 out of the
5 years immediately before the date of death, AND they cannot have
used the Section 121 exclusion for another principal residence sold
within 2 years before of after the date of death.

This provision is effective for sales or exchanges after December 31, 2007.

6. PENALTY  FOR  NOT FILING PARTNERSHIP RETURN AND S CORPORATION RETURN.
Penalties for not filing partnership returns on time have increased to $85/month/partner with
a maximum of 12 months. S Corporation will now have the same penalty per shareholder. A 
partnership with 2 partners filing a return 1 year late will see the penalty increase from a 
previous max. of $500 to a penalty now of $2,040. S Corporations were generally previously
not subject to any late filing penalties. Effective for tax years ending after December 20,2007.