Important Facts:
- California homeowners are not yet
exempt from the possibility of having to pay state income tax on foreign
debt as the result of a short-sale or foreclosure.
- Remember, as we’ve discussed,
although the Federal Government (IRS) extended the Debt Forgiveness Relief
Act through December 31st 2013, the California State
Legislature has not officially followed suit. Senate Bill 30 (SB30) was
thought to have an easy path for passing earlier this year to allow for
the extension of provisions of state law protecting homeowners from having
to pay income tax on the "forgiven debt" on a short sale.
Unfortunately, the bill was "hi-jacked" and linked to another
Bill, SB391, (which C.A.R. opposes (please see attachment)
- As Realtors, we are not qualified
to give any tax advice to clients. You must inform clients to get any and
all tax advice from their tax adviser.
- Sellers must be informed that a
short-sale may have credit or legal consequences and may result in taxable
income to the seller. Seller is advised to seek advice from an attorney,
certified public accountant or other expert regarding such potential
consequences of a short sale.
- Be certain to represent and
disclose this information to every seller that this could affect.
- Again, please read the attached,
which also includes a "Short Sale Proficiencies Fact Sheet" by
C.A.R.
Thank you and please see your manager with any questions.
Patrick
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