When the State of California lawmakers passed SB 401 and sent it to Governor Schwarzenegger's desk for signature, I immediately started calling my MANY past closed short sale sellers from last year, and 2010 to date. What is SB 401? It is legislation that cancels the State of California taxation of forgiven mortgage debt...meaning many short sale sellers just got a BIG break!
In a nutshell (and completely over-simplified), if a homeowner does a short sale and owes $300,000, and the NET proceeds from the sale that a bank will accept in a short sale equal $200,000, the seller of the property receives a 1099 from the bank for $100,000 (the amount of the "forgiven" debt).
More than one of my clients started crying...tears of joy. One had just done her taxes, and faced an $8,000 State of California tax bill. She confirmed with her CPA after our conversation that not only will that tax forgiven, but she would actually receive a small refund. That was music to my ears.
Now I am no CPA (and I do NOT give tax advice), however I do know that several of my past, present, and future short sale seller clients will benefit from the cancellation of the state taxation for forgiven mortgage debt.
Basically, the State of California was slow to enact this legislation to extend the cancellation of state taxation of the forgiven mortgage debt...the federal government enacted legislation back in 2007 that is valid through the end of 2012. This state legislation supposedly matches the timelines of the federal legislation.
Not EVERY short sale seller will qualify for this...please consult a qualified professional who can evaluate your situation.
Subscribe to:
Post Comments (Atom)
Posts
No comments:
Post a Comment