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ewelarry · Joined: 06 Aug 2009 Posts: 1 1.61 Dollars($)

We have asked our lender for a short sale. Property should sell for 250 and we owe 370,000. I have moved out, have a new permanent residence. Some say I will be hit with California taxes on the difference in "owed vs. sale".

However, the Mortgage Forgiveness Debt Relief Act of 2007 does not indicate that and my lawyer thinks I will be OK.

Any thoughts as to how ugly this can get?

Thanks.

Larry

sunnyca2009 · Joined: 04 Aug 2009 Posts: 1731 35.55 Dollars($)

Mortgage forgiveness act shoudl protect you from the federal taxes, but you may want to veify about the state taxes

jameshogg · Posted: Thu Aug 06, 2009 8:02 pm Post subject:

Hi ewelarry,

As far as I know, in case of a short sale, the deficient amount is not forgiven by the lender. You would be liable to pay it off. In case, if the lender forgives this balance amount, then you would be liable for taxes. But as California has the Mortgage Debt Relief Act in vogue, I don't think you would be liable for the taxes on the forgiven amount.

Thanks

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Short Sale