What are the tax consequenses of a short sale?

Federal and State laws have recently been enacted
that eliminate the tax consequences for most individuals who must
sell their house short of the full amount that they owe. As licensed
real estate professionals, we can help guide you to the appropriate
information and resources.

For more information about Tax Relief from debt cancellation in
your particular situation you should consult a tax professional
and refer to these government links:

IRS Mortgage Forgiveness Debt Relief Act

The Mortgage Forgiveness Debt Relief Act of 2007 generally allows
taxpayers to exclude income from the discharge of debt on their
principal residence. Debt reduced through mortgage restructuring,
as well as mortgage debt forgiven in connection with a foreclosure,
qualify for this relief. (from irs.gov

California Franchise Tax Board

On April 12, 2010, SB 401, the Conformity Act of 2010 was enacted.
It allows taxpayers who had all or part of the loan balance on their
principal residence forgiven by their lender to exclude the forgiven
debt from California gross income. The new law applies to discharges
of qualified principal residence indebtedness on or after January
1, 2009, and before January 1, 2013. (from ftb.ca.gov)


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