California Provides Tax Relief for Distressed Homeowners
Home buyers have been treated to lots of favorable news over the last couple of years, e.g., low home prices and interest rates, as well as federal - and now state - tax credits for purchasing a home.
Home owners and sellers have not enjoyed such good times. However, the state of California has just enacted a law that will forgive the income tax liability for a person who sells a home for less than the debt owed (a short sale, for example) anytime between January 1, 2009 - January 1, 2013. The move was intended to mirror a federal law that has been on the books for a few years now.
Many distressed home sellers are shocked to learn that when they complete a short sale, they get a bill from the IRS and the state tax authority, because under these tax codes, debt that is forgiven is treated as income, and we all know that any income earned must be taxed and paid by the person who “earned” it. The federal government has been forgiving this tax burden since 2007 and California has now followed suit.
Please note: I am NOT attempting to provide tax advice here. You should consult your tax advisor to get specific advice for your situation. For more information about the CA program, here is an article from the California Franchise Tax Board.
http://www.ftb.ca.gov/aboutFTB/Newsroom/Mortgage_Debt_Relief_Law.shtml
Call your tax expert for tax advice and call me with any real estate questions.
Kevin P. Cummins, J.D., e-PRO, SFR
Certified Relocation Specialist
Broker Sales Associate | Realtor
Coldwell Banker Residential Brokerage
3810 Valley Centre Drive #906
San Diego, CA 92130
cell: 858-750-9577
fax: 858-793-9944
web: kevincumminshomes.com
mail: kevinpcummins@gmail.com
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