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Posted: Fri Jan 30, 2009 8:56 am Post subject: Short Sale, Foreclosure

I live in California. At first I was thinking about trying to negotiate w/ both of my lenders to try to get a short sale. I'm in the whole about 150k. Then I started reading more about Mortgage Forgiveness Debt Relief Act of 2007. I'm ok in the federal side since it lasts until 2012, but I'm pretty much screwed for the State taxes since for California it only goes until 2008.

Has anyone heard anything if California plans to extend it to 2009?

Also if I choose the Foreclosure route, do I avoid paying any taxes? I'd rather go that way if I can avoid paying them because there's no way I'd be able to pay state taxes on the deficit. That's the reason I'm thinking about short sales and foreclosures in the first place! Sad

Posted: Fri Jan 30, 2009 4:54 pm Post subject:

Did you ever refi your loans?

If they are nonrecourse loans, then you shouldn't have to worry about any taxes on either loans.

Posted: Sat Jan 31, 2009 12:07 pm Post subject:

Thanks, can anyone verify this information for California?

sara · Posted: Mon Feb 02, 2009 4:28 am Post subject:

Hi,

Whether you go for a foreclosure or short sale, you may have to pay taxes on the unpaid deficiency if the lender forgives the amount of deficiency. As far as federal taxes are concerned, you may qualify for tax relief as in http://www.ftb.ca.gov/aboutFTB/newsroom/Mortgage_Debt_Relief_Law.shtml . However, you can't avoid the state taxes.

Take care

Posted: Mon Feb 02, 2009 10:10 am Post subject:

Hi Sara, I believe that that Mortgage Debt Relief only applies to recourse loans. If you have a nonrecourse loan, then you shouldn't have to worry.

h-t-t-p://w w w .irs.gov/newsroom/article/0,,id=174034,00.html

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