Question: What’s gonna happen in a short sale in California in 2009? Is there any extensions on the debt forgiveness for the state tax? We have a 750K loan and a buyer is offering 400K. How much will it cost us? Pls help
Answer: The “Mortgage Forgiveness Debt Relief Act of 2007,” was enacted to provide relief to families hit by the subprime mortgage market. Under California tax law, however, debt forgiven following mortgage foreclosure or renegotiation is considered income for tax purposes and may result in a tax liability for taxpayers on a short sale after Jan. 1, 2009.
I would definitely suggest contacting your tax accountant for more specifics.
