What We're Hearing

It being April 15, a day in which many rich Americans gladly pay Uncle Sam what is rightly owned to the Treasury Department, we present this bit of tax-related news: distressed homeowners no longer have to pay California state income tax on debt forgiven in a short sale, foreclosure, or loan modification. According to one reader, enacted into law recently was California Senate Bill 401 which aligns the state's tax treatment of mortgage debt relief income with federal law. He writes that, "For debt forgiven on a loan secured by a 'qualified principal residence,' borrowers will now be exempt from both federal and state income tax consequences. The existing federal exemption is for indebtedness up to $2 million, whereas the new California exemption is for indebtedness up to $800,000 and forgiven debt up to $500,000." At press time, I could not verify this information but it sounds about right...