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STATE TAX ON CANCELED DEBTS

Posted on: 03rd Feb, 2010 01:12 pm
i did a home laon modification in 2009, the bank that held the second mortgage used to purchace the home settled the loan for 82k less than owed. they sent me a form 1099c for 82k for "canceled debt" with a "0"
property value. califorina state says i owe 8k for the tax on this. in 2008 they forgave these types of taxes, but it expired 01/09. will i have to pay them even though the federal government says i need not pay them.
Hi BIGBADBRUIN,

As you received the 1099c form, that means your debts have been forgiven by the lender. IRS will consider this forgiven amount as your income and thus charge you taxes. However, as per the Mortgage Debt Relief Act, which has been extended till 2012, you won't be liable to pay the taxes.

Thanks
Posted on: 03rd Feb, 2010 11:10 pm
Thanks James, but my question is reguarding STATE TAX on cancelled debt. According to the information I have, and Turbo-tax, I am liable for
taxes on the forgivin debt to the state of California. There was a similar
relief from 01/07-01/09 but it expired.
Any information you can share about that would be huge.
Mike
Posted on: 05th Feb, 2010 08:59 am
Welcome BIGBADBRUIN,

I don't think that the Mortgage Forgiveness Debt Relief Act has expired. You can check out the given website for the same:
http://www.irs.gov/individuals/article/0,,id=179414,00.html

I would suggest you to contact a tax consultant in this regard and take his opinion.
Posted on: 07th Feb, 2010 08:39 pm
THANKS AGAIN, THE FEDERAL DEBIT RELIEF IS STILL INTACT. IT'S THE
STATE OF CALIFORNIA THAT IS NOT FORGIVING THIS CANCELLED DEBT.
TAX. I WILL CONTACT A TAX PROFESSIONAL.
Posted on: 10th Feb, 2010 02:54 pm
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