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What Is A "discharge Of Qualified Principal Residence Indebtedness"?: What You Should Know
Interest in excess of 2,000,000, or A principal residence located in Montana does not qualify for the exclusion from gross income, but any unpaid principal residence mortgage debt does qualify for a discharge of qualified principal residence indebtedness. Discharge of Mortgage If the payment of some or all payments of a secured debt qualifies for the exclusion from gross income, then a discharge of a mortgage is also eligible. A mortgage discharge is not an eligible property transaction under the mortgage-related exclusions of section 125 of the Code. Discharge of Mortgage Loan If the payments of some or all payments of a secured debt qualified for the exclusion from gross income when the debt was first incurred, and payments of any or all of those payments qualified for the exclusion when the debt was repaid, the following applies to a loan discharge. There will be no deduction for the principal and interest paid on a new mortgage loan. This may be treated as the payment of principal and interest on a prior mortgage loan. If payments of principal and interest on the mortgage are already included in the income of the taxpayer as a deduction, this result may be considered as the deduction of the principal and interest on the mortgage. If a mortgage has been forgiven, tax liability on it does not change after a mortgage discharge. However, the IRS will generally be able to use the forgiven loan to satisfy other requirements. A loan discharge will not reduce the balance on a loan.
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Hey my name is steve parr and today we are going to talk about the principal residence exemptions so the principal residence exemption allows you to sell a property and not pay any tax on it so the capital gain that you would normally accrue from the sale of that property doesn't apply and so this video we want to cover off some of the uh nuances of that and ensure that if you are thinking about making use of the principalities exemption that you are doing it properly so the first thing you want to keep in mind is that the exemption needs to be reported so since 2023 the cra has required that uh this exemption be reported on your personal income tax return so you want to make sure that you're working with your accountant to ensure that that is done and the second criteria is that resonance exemption is only going to apply to a property that you actually live in so a property the cra uses the term ordinarily inhabited so while there's not a specific set number of days that the cra sets out that you are actually resident inside of the home it is the cra if they assess uh and and look in deeper into whether the exemption actually applies or not they're gonna look at things like the length the amount of time that you are in the property they're going to look at your sources of income uh whether the whether the real estate sale was done as a part of another series of transactions so such as a like a real estate flipping venture so you want to ensure that uh that that the narrative that is behind the the sale of the property is is compliant with what...