Tax relief for CA foreclosure or short sale

Hi Stefanie,

Your attorney will be the best one to let you know whether or not you would be able to qualify for insolvency. You should consult your attorney and get his opinion in this regard.

Thanks

Sure...let me just ring up my attorney. Or call my CPA. Is everyone insane? Are there any normal people anymore? I don't have attorneys or CPA's. If I could afford that, why would I have foreclosed? Without this legislation I owe the state of CA a HUUUUGE dollar figure and all I did was try and buy a house that lost about 40% in equity. After having two kids and trying to hang on, we had to get out since it was the size of a shoebox plus I lost about every benefit at work and decided eating was more important. Now the state of CA wants to put this gigantic tax bill!!! They can't pass budgets, or balance a budget because this was the plan? To get the money from people who foreclosed?

I hate this country. That guy who flew his plane into the IRS building is a national hero. I don't care if they pass this legislation, the fact that it takes them this long to figure crap out is a sign of their idiocy.

You know what's funny? I did seek legal advice from an attorney that is an expert in foreclosures and he told me that I would not have to pay back anything......I saw him in October 09 and recently emailed him to find out the CA tax answer and he has yet to answer back. I have a purchase money mortgage and he said that I wouldn't have to pay taxes to both fed and state.....but I think he is mistaken..I paid a lot of money to have an hour consultation with him.

Yes, Stefanie, he was mistaken. They are all mistaken, that's because they are all "not smart" (not allowed to say idi0t on this); real estate lawyers, CPA's, realtors, our trusted government officials. My loans were PMM also, NON-RECOURSE there Wells Fargo. But because of how they fill out the 1099-C it sure does look like I owe the taxes. So I sit biting my fingernails on whether I can show insolvency or if they pass the legislation. The summary of that is that this is insane. They caused the bubble, the banks then got a bailout and there is a potential for me to get stuck with a huge tax bill?!?!? Seriously?!?!

There is a hearing/vote on bill AB 1779 on 3/22/2010 that will fix this problem if it is passed. I also called H & R Block today and they said that they could handle the "Insolvency" filing if it came to that.

I also found a PDF Worksheet that looks like its from the IRS and it DOES have 401k/IRA's in the Assets area.

The key word there is correct..."IF" it's passed. If the Feds somehow figured out that they needed to encompass 2007 to 2012 with the Debt Mortgage Relief Act, why does California need to pass a new one every year? Can't they just see the writing on the wall that this housing bubble/market was B.S. and it's a given you can't hit people with outragreous tax bills because of it. How can you give new home buyers a huge tax credit and think it's not a given you can't r*pe those that foreclosed for the money? That's not a given?

Thanks for all of your comments. They are helpful. I kind of figured I was screwed with my retirement. Is there a way I can hide it??????? What about declaring BK even with the retirement account? The Country, let alone CA is in TROUBLE and us little people/ middle class suffer dearly. My loan co were messing with me. The first loan co put me through a three month trial forebearance plan that last five months instead of three then increased the payment by 600.00 and said they wanted another three month trial....Screw that...I said, go ahead and foreclose then. YOU WILL LOOSE..but I guess I am going to loose too unless CA passes this new bill...

Stefanie,

I would call your local H&R Block and see what they say. You can get a free consultation about your situation. CPA's and Tax Attorneys for the most part are NOT up to speed on this issue. BK is an another option to explore but it will ding your credit up and stay with you longer.

My feeling is that CA will pass some legislation to forgive this COD debt at least for 2009 and probably 2010 because this problem is going to get worse this year.

Thanks Waffle for the advice..I will do...I will have to worry about this for 2010 taxes since I have not yet left my house..I am in the process of doing a short sale this year so hopefully the bill will be passed. The problem is going to get worse for sure. Good Luck to you!!!!

Here's the good news. There was about 623,000 foreclosures in CA in 2009. Who know's how many left a cancellation of debt, so maybe half? Regardless, if the state of CA doesn't pass the legislation, that pretty much solves the debt problem.

WOW Kedo...I had no idea it was that many. Yes, if everyone pays the state taxes on those losses then CA is in good shape. I am sure most people will have to set up a payment plan...The interest alone will pay off CA's debt..:0)

Just got back from H&R Block and 401k or IRA accounts DO count as assets for insolvency claims. Google "Insolvency Worksheet" and download it to review the entire list of items.

this was printed in our local newspaper this morning. Looks like we all need to call the Governors office.



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i am seeing some really bad advice here! and you guys are in the mortgage industry???

slightly confused...i can see why you are if you are reading this advice!

raj v - non-recourse loan are affected. purchase and refinance of purchase non recourse loans qualify for federal relief if principal residence. they qualify for ca state relief for 2007-2008 only (at this time) with limitations. currently not for 2009-2012. it has not yet been extended. the bills before legislature will provide a stop gap to mirror the federal program dates. the earlier 2007-2008 state version wasn't signed until the end of 2008 and was retroactive to 2007.

people---read the ftb bulletin that has been referenced here. it is clear as day if you take the time to read it!

I am also slightly confused.
I am in a process to shortsell my primary home in CA. Are you saying if my loan has never been refinanced, and is a non-recourse loan, I do not owe any Tax to California State for bank filed 1099?