Well, we spent the day with other California Realtors in Sacramento, and met with our local Assembly members Ruskin, Beall, and Maldonado, and State Senators Alquist, Simitian and Lieber. One of the hot issues we discussed with them is SB 1055, the upcoming bill that would eliminate the tax penalty on the "phantom" income created when a lender forgives some of the homeowner's mortgage and allows a "short" sale.
Our association supports the bill, but would like it to be amended to conform with the federal statute passed in 2007. This one excuses home sellers from income tax debt that is forgiven, and covers a period from January 1, 2007 through January 1, 2010. The state law would provide debt relief only for the years 2007 and 2008.
If California law doesn't conform with federal law, it creates a trap for any homeowner whose decisions are controlled by the more costly IRS savings.
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