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Damned if You Do, Damned if You Don’t: Senate Bill 1055

by Mike Wiegert, broker Chico Homes Real Estate

A bill that is now pending before the California full Senate would make it possible for California taxpayers to avoid paying taxes on forgiven mortgage debt through a short sale, short sale payoff or other loan modifications.

Senate Bill (SB) 1055, authored by Sen. Michael J. Machado, passed the Senate Revenue and Taxation Committee on an 8-0 vote. The measure would help California taxpayers whose lenders have forgiven a portion of their mortgage debt, by allowing them to exclude the forgiven debt from their incomes for state income tax purposes. Under existing state tax law, forgiven debt on mortgages is taxable to the borrower as ordinary income for the year in which the debt is forgiven. OUCH!

Think about it. You’re already in financial straits, otherwise you wouldn’t be in foreclosure. You list your home with your friendly Chico Realtor hoping to stem off the foreclosure and hopefully not have your credit significantly damaged. Next thing you know you’re getting a tax bill from the state.

Continue reading this article on The Pink Couch!

Posted by Chico CA Real Estate by Sandi Bauman, Chico CA Realtor on 03/03/2008 11:57 PM

Comments (6)

senate bill 1055, short sales, foreclosures, chico realtor

Originally posted at: Chico Real Estate blog: Damned if You Do, Damned if You Don’t: Senate Bill 1055

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6 Comments on Damned if You Do, Damned if You Don’t: Senate Bill 1055

MAR

2008

Hymm oh my goodness just another fine money maker , super post, good luck with your business!

Hope to read more from you in the future :)

Yes, I had a client that was told by the lender after the short sale that they would be submitting a form to the IRS showing it as taxable income. She was floored, as was I.

I sure hope the bill is passed!

PS - went over to the Pink Couch. Great site!

There are quite a few bills I hope get passed....this being one of them. THere really isn't a point to helping someone getting out of financial dire straights if you turn around and slap them with an enormous tax bill.

Sandi, forgiving mortgage debt on a short sale definitely can help people out that are in dire financial straits.

MAR

2008

Thanks to all of you for the favorable comments. A number of Chico readers have given me support for the articles in the Chico News and Reviews. Chico readers seem to enjoy and learn from the weekly column. Big Kudos to Senator Michael Machado for introducing this bill on the State level.

Mike Wiegert

Broker, Chico Homes

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