Notice 2016-72: Discharge of qualified principal residence indebtedness

Discharge of qualified principal residence indebtedness

The IRS today released an advance version of Notice 2016-72 providing guidance concerning the discharge of qualified principal residence indebtedness that is initiated in 2016 but not completed before 2017.

1000

Related content

The PATH Act (Protecting Americas from Tax Hikes Act of 2015) extended for two years—generally from January 1, 2015, through December 31, 2016—a provision that allows for the exclusion of income from the discharge of qualified principal residence indebtedness (with a modification for discharges pursuant to a binding written agreement entered into before January 1, 2017).

Notice 2016-72 [PDF 79 KB] clarifies that qualified principal residence indebtedness is discharged subject to an arrangement that is entered into and evidenced in writing before January 1, 2017, if:

  • Before 2017, a mortgage servicer sends a borrower-homeowner (the taxpayer)—under the Federal Housing Finance Agency’s (FHFA’s) principal reduction modification program (PRMP)—a notice in conjunction with a written trial period plan (TPP) or, for a taxpayer in an active TPP, a separate notice in a written opt-out letter outlining the terms and conditions of the permanent mortgage loan modification following completion of the active TPP;
  • The taxpayer satisfies all of the TPP and PRMP conditions; and 
  • The taxpayer and mortgage servicer enter into a permanent modification of the mortgage loan on or after January 1, 2017.

Today’s guidance also applies to a TPP under the home affordable modification program (HAMP).

© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us

 

Request for proposal

 

Submit

KPMG's new digital platform

KPMG International has created a state of the art digital platform that enhances your experience, optimized to discover new and related content.