April 9th, 2010 1:41 PM by Dave Gubler
Thousands of Californians can breathe a bit easier as California Senate Bill 401 has passed in both the Assembly and in the Senate and all indications are that Governor Schwarzenegger will sign it in to law.
At present time the amount of debt forgiven by a lender in a short sale or a foreclosure is considered taxable income by the state of California. SB401's passage brings California in line with the federal government's relief for mortgage debt forgiven (via the The Mortgage Forgiveness Debt Relief Act and Debt Cancellation Act of 2007) and will protect people who sell their homes as a short sale from paying state income taxes on the amount of debt forgiven. The current text of the bill is available here: SB 401.
Visit www.IMLRealEstate.com/ShortSale for a variety of information regarding short sales.
(You should consult a tax professional in order to determine the exact implications of SB401 & MFDRA of 2007 for your specific circumstances.)
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Dave Gubler / IML Real Estate