As the House of Representatives recently passed the Mortgage Foregiveness Debt Relief Act of 2007, there may be wrinkles that will come to light as more people turn to this Act for relief from having to pay tax on home mortgage indebtedness.

This is a brief from my recent issue from Berntson Porter & Company, CPA’s & Consultants (page four of the .PDF document):

“….. is a possible downside to this bill for those taxpayers who
wish to make their second home their primary residence for
the home-sale exclusion. After 2007, if a home is sold within
five years after becoming your main residence, part of the gain
will be taxed even if the two-out-of-five-year test is met. The
portion of the gain that will be taxed is based on a percentage
of the time before the sale when the home was used as a second
home or rented out.”

This is not tax advice and is for general informational purposes only, consult your beloved tax advisor or tax attorney for your specific circumstances.