Debt Relief Facts
New law?Debt Forgiveness act canceled for 2009?
So when we went to see our tax guy we were told that California Franchise Tax Board announced in January (2010) that Debt Forgiveness act is not in effect for 2009.
This was by a total surprise to us. Last year we were told that we wouldn’t be taxed for the 1099 amt because it was our primary residence, and we never refinanced or pulled money out. As a matter of fact, Californians who lost their homes in 2007 or 2008 were not taxed but 2009 yes…?
So now, we are going to be taxed on $150,000+ that we never saw. I understand if we actually pulled any money out, but we did not.
Is anything being done about this? I am sure there are many people in the same boat as us and I just feel that his isn’t fair!
Any groups getting together to express their opinions on this new law and perhaps get a break from the State? http://www.ftb.ca.gov/aboutFTB/newsroom/Mortgage_Debt_Relief_Law.shtml
You need to consult a tax professional. Probably you will not owe any tax.
1. You may have to report sale on Schedule D (Form 1040).
2. Any debt canceled is your income if it was recourse liability.
3. If you lived in the house for two years and owned it for two years in last 5-years, you may be eligible to exclude gain of up to $250,000. Sale of Main Home: http://taxipay.blogspot.com/2008/03/profit-from-sale-of-your-home.html
4. The Mortgage Forgiveness Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt of recourse loan on their principal residence.