California Short Sale tax

California “Short Sale” Sellers Facing DISASTEROUS 2009 Income Tax!

There are tens of thousands of homeowners in California who have sold or are selling their homes for less than is owed on them to the mortgage company.  This is called a “Short Sale”. The Federal government has decided not to charge income tax on the amount of the debt that was forgiven because of the Short Sale for many qualifying sellers.  ( Speak with your tax adviser to see if you qualify.) California’s Franchise Tax Board was in alignment with the IRS not taxing this forgiven debt as ordinary income for those who qualified.  So, for those Sellers who qualified,  in 2007 and 2008 California followed the Fed’s position on this debt NOT being taxed as ordinary income.  HOWEVER,  the California law was NOT extended for 2009!  What this means is that California’s Franchise Tax Board will be charging an income tax on this forgiven debt, and tax it as ordinary income!  I, Jim Walberg, am not a tax adviser, however, IF THIS TOPIC APPLIES TO YOUR SITUATION CONTACT YOUR TAX ADVISOR TODAY! Read more