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suspended Income Tax on Short Sale extended for 2014


C.A.R. has been working with California Sen. Barbara Boxer to protect distressed homeowners from debt relief income tax associated with a short sale in California.  As part of this effort, Sen. Boxer requested the Internal Revenue Service (IRS) to provide guidance on whether mortgage debt forgiveness in a lender-approved short sale would be taxable income under federal law, given California´s recent non-recourse laws for short sales, which were hard fought victories by C.A.R.

The IRS has clarified in a letter that California´s troubled homeowners who sell their homes in a short sale are not subject to federal income tax liability on "phantom income" they never received.  The IRS recognizes that the debt written off in a short sale does not constitute recourse debt under California law, and thus does not create so-called "cancellation of debt" income to the underwater home seller for federal income tax purposes.  This clarification rescues tens of thousands of distressed home sellers from personal liability upon expiration of the Mortgage Forgiveness Debt Relief Act of 2007 on Dec. 31, 2013.



RE/MAX COLLEGE PARK REALTY

Cary Hairabedian

Associate

10791 Los Alamitos BlvdLos AlamitosCA90720
Business:(800) 944-2441
Fax:(714) 960-2497
CalBRE License #:00876519



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(800) 944-2441

 

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BRE License # 00876519