I 
111TH CONGRESS 
2D SESSION 
H. R. 4826 
To promote neighborhood stabilization by incentivizing short sales, as a pref-
erable alternative to foreclosure, through the Internal Revenue Code 
of 1986. 
IN THE HOUSE OF REPRESENTATIVES 
MARCH 11, 2010 
Mr. FOSTER introduced the following bill; which was referred to the Com-
mittee on Ways and Means, and in addition to the Committee on Finan-
cial Services, for a period to be subsequently determined by the Speaker, 
in each case for consideration of such provisions as fall within the juris-
diction of the committee concerned 
A BILL 
To promote neighborhood stabilization by incentivizing short 
sales, as a preferable alternative to foreclosure, through 
the Internal Revenue Code of 1986. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Responsible Home-
owner Relief Act of 2010’’. 
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SEC. 2. DEDUCTION FOR LOSS FROM SALE OF PRINCIPAL 
RESIDENCE. 
(a) IN GENERAL.—Part VII of subchapter B of chap-
ter I of the Internal Revenue Code of 1986 (relating to 
additional itemized deductions for individuals) is amended 
by redesignating section 224 as section 225 and by insert-
ing after section 223 the following new section: 
‘‘SEC. 224. LOSS FROM SALE OF PRINCIPAL RESIDENCE. 
‘‘(a) ALLOWANCE OF DEDUCTION.—In the case of an 
individual, there shall be allowed as a deduction for the 
taxable year any loss recognized on the sale or exchange 
of property during the taxable year if, during the 5-year 
period ending on the date of the sale or exchange, such 
property has been owned and used by the taxpayer as the 
taxpayer’s principal residence for periods aggregating 2 
years or more. 
‘‘(b) LIMITATIONS.— 
‘‘(1) AGGREGATE LIMITATION.—The aggregate 
amount allowed as a deduction under subsection (a) 
for all taxable years shall not exceed $9,000. 
‘‘(2) ANNUAL LIMITATION.— 
‘‘(A) IN GENERAL.—The amount allowed 
to a taxpayer as a deduction under subsection 
(a) for a taxable year shall not exceed $3,000. 
‘‘(B) CARRYFORWARD.—If the deduction 
allowable under subsection (a) for any taxable 
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year exceeds the limitation imposed by subpara-
graph (A) for the taxable year, the excess shall 
be carried to each of the 2 succeeding taxable 
years and added to the deduction allowable 
under subsection (a) for such succeeding year. 
‘‘(3) EXCLUSION OF LOSS ALLOCATED TO NON-
QUALIFIED USE.— 
‘‘(A) IN
GENERAL.—Subsection (a) shall 
not apply to so much of the loss from the sale 
or exchange of property as is allocated to peri-
ods of nonqualified use. 
‘‘(B) ALLOCATION.—For purposes of sub-
paragraph (A), loss shall be allocated to periods 
of nonqualified use based on the ratio which— 
‘‘(i) the aggregate periods of non-
qualified use during the period such prop-
erty was owned by the taxpayer, bears to 
‘‘(ii) the period such property was 
owned by the taxpayer. 
‘‘(C) PERIOD OF NONQUALIFIED USE; CO-
ORDINATION WITH RECOGNITION OF GAIN AT-
TRIBUTABLE TO DEPRECIATION.—For purposes 
of this paragraph, rules similar to the rules of 
subparagraphs (C) and (D) of section 121(b)(5) 
shall apply. 
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‘‘(4) APPLICATION TO ONLY 1 SALE.— 
‘‘(A) IN
GENERAL.—Subsection (a) shall 
not apply to more than 1 sale or exchange of 
a principal residence by the taxpayer. 
‘‘(B) SPECIAL
RULE
FOR
JOINT
RE-
TURNS.—In the case of a joint return with re-
spect to the sale or exchange of a principal resi-
dence, if a deduction was allowable under sub-
section (a) to a spouse for a prior sale or ex-
change of a principal residence, paragraphs (1) 
and (2)(A) shall be applied by reducing the dol-
lar amounts therein by the deduction so allow-
able (one-half of such deduction in the case of 
a joint return). 
‘‘(5) SALE OR EXCHANGE WITH RELATED PER-
SON.— 
‘‘(A) IN
GENERAL.—Subsection (a) shall 
not apply to any sale or exchange to a related 
person. 
‘‘(B) RELATED PERSON.—For purposes of 
this subparagraph (A), a person (hereinafter in 
this subparagraph referred to as the ‘related 
person’) is related to any person if— 
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‘‘(i) the related person bears a rela-
tionship to such person specified in section 
267(b) or section 707(b)(1), or 
‘‘(ii) the related person and such per-
son are engaged in trades or business 
under common control (within the meaning 
of subsections (a) and (b) of section 52). 
For purposes of clause (i), in applying section 
267(b) or 707(b)(1), ‘10 percent’ shall be sub-
stituted for ‘50 percent’. 
‘‘(c) HOME SALES PRICE MUST BE CONSISTENT 
WITH LOCAL MARKET.—The sale or exchange of a prin-
cipal residence shall not be taken into account for pur-
poses of subsection (a) unless the taxpayer demonstrates 
to the satisfaction of the Secretary that the price for which 
such home is sold (or value received in the case of an ex-
change) is consistent with local property values of dwell-
ings of a similar size and condition at the time of such 
sale or exchange. 
‘‘(d) APPLICABLE RULES.—For purposes of this sec-
tion, rules similar to the rules of subsection (d) of section 
121 shall apply, except that paragraph (6) thereof shall 
be applied by substituting ‘loss’ for ‘gain’. 
‘‘(e) ELECTION TO HAVE SECTION NOT APPLY.— 
This section shall not apply to any sale or exchange with 
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respect to which the taxpayer elects not to have this sec-
tion apply. 
‘‘(f) TERMINATION.—The section shall not apply to 
the sale or exchange of a principal residence after Decem-
ber 31, 2012.’’. 
(b) DEDUCTION
ALLOWED
IN
COMPUTING
AD-
JUSTED GROSS INCOME.—Subsection (a) of section 62 of 
such Code is amended by inserting before the last sentence 
the following new paragraph: 
‘‘(22) LOSS FROM SALE OF PRINCIPAL RESI-
DENCE.—The deduction allowed by section 224.’’. 
(c) CONFORMING AMENDMENTS.— 
(1) Section 165(c) of such Code is amended by 
striking ‘‘and’’ at the end of paragraph (2), by strik-
ing the period at the end of paragraph (3) and in-
serting ‘‘; and’’, and by inserting after paragraph 
(3) the following new paragraph: 
‘‘(4) to the extent provided in section 224, 
losses from the sale or exchange of a principal resi-
dence.’’. 
(2) Section 165(f) of such Code is amended by 
inserting ‘‘and in section 224 in the case of losses 
from the sale or exchange of a principal residence’’ 
before the period at the end. 
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(d) CLERICAL AMENDMENT.—The table of sections 
for part VII of subchapter B of chapter 1 of such Code 
is amended by striking the item relating to section 224 
and inserting the following: 
‘‘Sec. 224. Loss from sale of principal residence.’’. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2008. 
SEC. 3. WAIVER OF FANNIE MAE AND FREDDIE MAC WAIT-
ING PERIOD REQUIREMENTS AFTER SHORT 
SALE FOR CERTAIN MORTGAGORS. 
(a) IN GENERAL.—The Federal National Mortgage 
Association and the Federal Home Loan Mortgage Cor-
poration shall waive the applicability of any short sale 
waiting period requirement with respect to the purchase 
and any commitment to purchase, by such Association or 
Corporation, of a covered mortgage if the mortgagor under 
such covered mortgage— 
(1) was, at the time of the short sale of the 
principal dwelling of such mortgagor that was sub-
ject to the previous mortgage, current on all pay-
ments due under the mortgage satisfied by such 
short sale; and 
(2) has a credit score greater than the equiva-
lent of a FICO score of 679. 
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(b) DEFINITIONS.—For purposes of this section, the 
following definitions shall apply: 
(1) COVERED MORTGAGE.—The term ‘‘covered 
mortgage’’ means a mortgage under which the mort-
gagor is an individual who was previously the mort-
gagor under another mortgage on the principal 
dwelling of such mortgagor, which principal dwelling 
was sold in a short sale. 
(2) SHORT SALE.—The term ‘‘short sale’’, with 
respect to an individual, has the meaning given such 
term under section 605(a)(7)(B) of the Fair Credit 
Reporting Act. 
(3) SHORT
SALE
WAITING
PERIOD
REQUIRE-
MENT.—The term ‘‘short sale waiting period re-
quirement’’ means any underwriting or other re-
quirement of the Federal National Mortgage Asso-
ciation or the Federal Home Loan Mortgage Cor-
poration that requires, for the purchase by such As-
sociation or Corporation of a mortgage under which 
the mortgagor is an individual who was previously 
the mortgagor under another mortgage that was 
sold in a short sale, that any minimum period of 
time elapse after the occurrence of such short sale. 
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(c) SUNSET.—The provisions of this section shall 
cease to be effective on and after January 1, 2013. 
Æ 
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